Honda in India: New Challenges

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Excerpts

Honda first entered the Indian market in 1984 through a joint venture with Kinetic Engineering Limited (Kinetic). The JV called Kinetic Honda Motors Limited (KHML), was set up to manufacture scooters. The partnership’s flagship product, ‘Kinetic Honda’ was considered a game changer in the Indian scooter market with several features like variomatic gearless transmission, self-start, auto choke, etc. Honda entered into another joint venture the same year with the Hero Group called Hero Honda Motors Limited (Hero Honda) to manufacture motorcycles. The Indian motorcycle market was very sluggish at that time. Many people preferred scooters to motor cycles as scooters were perceived to be safer and more suited to the Indian roads.

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In 2011, Honda India started to face new challenges in the form of increased competition for and decreasing sales of all of its models sold in India from 2011. Some of the new competitors who entered the Indian automobile market started to pose stiff competition to the company and overtook it in some product segments where it had been a leader. In 2011, VW’s Vento replaced Honda City as the top selling mid-size sedan in the Indian market within 8 months of its launch..........

Some analysts said that the main reason for the decline in the performance if Honda India was its lack of a long-term strategy for a market like India. They said Honda had grown too complacent due to the good performance of its high-end sedans and the brand value it enjoyed in the Indian market. The Indian market was traditionally dominated by small cars due to the low income levels of its population.......

In August 2012, Honda completely bought out the stake in Honda India and made it its 100 percent subsidiary. After the stake sale, Honda Siel Cars India Limited was renamed as Honda Cars India Limited. Honda wanted to have total control over its Indian operations to further improve its fortunes in one of the most difficult automobile markets in the world..........

Apart from launching new models, one of the important steps that Honda India took was to drastically reduce the prices of its vehicles in India. It slashed the price of its flagship sedan, Honda City by Rs. 44,000 to Rs. 66,000 (depending upon the model) in June 2011 to compete better in the Indian market. In August 2011, Honda India released a new version of its Honda Jazz which was priced nearly Rs. 150,000 lower than its previous version..........

New launches from Honda India started to give good results to the company in 2014 in the form of higher sales and market share. The demand for many of Honda India’s newly launched models like Honda Amaze and Honda Mobilio meant that its plants in India reached their maximum capacity. The demand for many of its models exceeded the expectations of the company and Honda India started second shifts in its manufacturing plants..........

Exhibit I:Classification of Indian Passenger Vehicle Market
Exhibit II: Honda India’s Cars Launched in India
Exhibit III:Models Sold by Honda India in 2014 and Nearest Competitors (Figures in INR Thousands)
Exhibit IV:Chart of Petrol Prices in India from 2002 to 2014 (Prices in the Country’s Capital Delhi)