In the Autocar-Bloomberg TV India 'CEO On The Drive' series, Hironori Kanayama, president and CEO of Honda Cars India, speaks to Hormazd Sorabjee on catering to pent-up demand, expanding to Tier 3 and 4 cities
02 Sep 2014 | 3226 Views | By Hormazd Sorabjee
In the Autocar-Bloomberg TV India 'CEO On The Drive' series, Hironori Kanayama, president and CEO of Honda Cars India, speaks to Hormazd Sorabjee on catering to pent-up demand, expanding to Tier 3 and 4 cities, the new Jazz and Honda's absence in the compact SUV segment.
Will the new government’s ...
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In the Autocar-Bloomberg TV India 'CEO On The Drive' series, Hironori Kanayama, president and CEO of Honda Cars India, speaks to Hormazd Sorabjee on catering to pent-up demand, expanding to Tier 3 and 4 cities, the new Jazz and Honda's absence in the compact SUV segment.
Will the new government’s change in policy direction and an improving economy be enough to get the Indian auto industry back on track?
First of all, I support the continuation of the excise duty cut – that’s what has helped spark the market. It is my hope that GST (Goods & Services Tax) is introduced as early as possible. If the government can invite more foreign investment, the Indian economy will go faster than it is at the moment.
Is GST important for you to streamline your tax base, especially with different state taxes and in terms of logistics as well?
It is important for us as the current tax structure is very complicated. We have to make adjustments in the workforce and besides, GST will get us a better chance and opportunity to rationalise our car prices as well.
Would you like to see more foreign investment come into India and should the government take steps towards that?
We have already a capacity of 240,000 vehicles per annum that we have not utilised fully. So, first of all, we should do that. At present, both plants are working fully but at Tapukara we have only one shift. We hope to start a second shift as early as possible. We can then think about our next step.
It has been a fantastic year for Honda with 83 percent growth. Is that the highest in Honda globally?
Yes. No market has grown as much as India for Honda and the management is surprised at this growth. We have to thank our customers for this growth. Honda has good products in the market such as the Amaze, City, Brio and CR-V and now the Mobilio, which is another expansion in our targets.
You have been a solid No. 3 behind Maruti and Hyundai. Do you have the ambition to move up the ladder? What’s your take because Maruti seems to be invincible now?
Maruti Suzuki is a very great company. As far as Honda goes, we have a big gap in our products. Our dream is to be number one in customers’ trust and, therefore, numbers. Our rankings do not matter to me because it depends on market growth. We want to be the most trusted company in India.
Your speedy growth must have posed a challenge for your service network. How have you handled this?
Our suppliers are ready to increase their production capacity as we increase ours. We will also increase our dealer network from 170 to 230 and, fortunately, thanks to the great demand for our products, we have many dealer applicants.
Given the demand and waiting period for your cars, could it lead to a little bit of customer dissatisfaction, and dealers may be more in selling mode than in servicing mode?
We are aiming at trust and the highest customer satisfaction. Our dealers’ mission is not just sell cars but give the best service and therefore we make them the strongest dealers in customer satisfaction.
Are you looking at new products for new segments?
India has many big families and we want to give them the joy of driving as a family. So we have the Mobilio which has been designed with the ‘man maximum and machine minimum’ philosophy. We are proud of the space, the excellent design and highest mileage in this segment.
You’ve got a good product pipeline — the just-launched Mobilio and the Jazz in the future. Are you neglecting the two ends of your product range — the Brio and the top-end which is the CR-V?
We are interested in every car that we have launched. We still have very strong demand for the Brio as well as some people prefer the Brio to the Amaze and, therefore, we will keep selling this car.
Are you happy with the sales numbers?
Our production capacity is fully utilised at present and hence the sales numbers do not matter.
We’ve not seen a facelift on the Brio and are not even seeing a diesel as well. Are these signals that perhaps, in terms of product evolvement and upgradation, the Brio isn’t getting as much as some of the other cars are?
We are still focused on the new models to come and then will consider a facelift or the changes on the Brio.
Honda is selling small numbers of the CR-V. Perhaps, you need diesel to be successful in that segment. What is your strategy?
We have strong demand for the Accord but we are busy with production of current models. I don’t think we should keep our customers waiting too long for the Accord. We will think about it as early as possible.
As for the CR-V, it is the best-selling car in the US and China but in India the SUV market, unfortunately, isn’t that big. We will still go as per the strategy and, when the market grows, we will think about the diesel version as well.
What is your view on the petrol-diesel demand situation in India? Is it too volatile and does it affect your production?
The ratio of diesel and petrol changes every month. I think for diesel it’s 70 percent approximately unless there is any drastic change of fuel prices. Of late, there is a shift towards petrol and we are now producing about 40 percent petrol (models).
How does this make you plan for the powertrains because it is not easy to keep switching and you need a lot of manufacturing flexibility?
There is not much difference in the production of diesel and petrol (models) and we have sufficient capacity to produce both. We can be very flexible in this regard.
Honda has had a great run in the past year, riding high on the success of the Amaze which has been a game-changer. When Honda came to India in December 1995, it started out with a launch of the hugely successful City in 1998 and over the years, the City has become an iconic brand. Is it the backbone for Honda in India?
The City has done better for Honda but since we launched the Amaze, it has become the second one. The Mobilio will be the third one.
What about the hatchback segment because that is the mass body style in India. Is that also going to be a focus area in the future?
That is why we have the Jazz, which will be launched in March next year.
What lessons did you learn from the earlier Jazz that you will take into the new Jazz?
The key thing is how to capture customer interest and demand, and there was some gap in our perception and the reality.
There has been a lot of growth in the compact SUV segment, where Honda is conspicuous by its absence. Are you looking at that segment?
We are studying the market because it is growing. We don’t have an SUV in our line-up.
Is this going to be one of the other pillars in future?
Yes, this could be our fourth or fifth pillar.
In India, Honda seems a bit more of an urban brand. Do you see scope for expanding in Tier 3 and 4 cities?
We have 60 dealerships in this fiscal and 40 are from Tier 3 markets which are very essential for us.
Where do you see Honda five years from now? Do you think you will, at some point, have to increase volumes to keep the scale effect and be competitive in the market?
We have to grow faster than the market. We plan to sell 300,000 cars in 2016-17. To have those numbers, one has to be present in a lot many more segments.
I don’t think we have to increase our line-up so much. The City, Amaze and Mobilio can contribute a lot. I believe in the strength of the Indian economy and the market will pick up very soon.
Moving on towards the brand and positioning, I have noticed you don’t want to pursue the taxi market, even with the Mobilio. Do you think that in the long-term interest of the brand, it is better to stay away from, let’s say, a commercial fleet?
At Honda, we do not have any taxi-market cars globally. This is because our mission is to contribute towards the life of the individual customer. It is the individual market that grows the fastest and not the taxi market.
The Indian consumer has been brutal with you. Without a diesel, they almost forgot Honda. They have forgiven Honda but not forgotten the brand. What have you learnt from the Indian consumer?
Indian customers are straightforward and therefore we don’t want to be left behind, otherwise we would be a very unloyal company to our customers.
(This interview was published in the August 15, 2014 issue of Autocar Professional)