Honda India is losing market share. And how!
If you drive 1,500 kms a month (average for the primary car of an Indian household) and your car delivers about 9.5 kpl (average fuel efficiency for petrol sedans in a crowded Mumbai or Bangalore city), your monthly fuel bill just went up to a whopping 11 grand! I doubt anyone was sweating over the latest Rs. 5 / liter petrol price hike as Honda India was. After all, they are the sole car manufacturer in India with a petrol-only range of vehicles. And few potential customers driving 1,500+ kms a month would be short-listing a petrol sedan anymore.
As recent as calendar year 2007, Honda was the No. 5 manufacturer in India with an annual sales volume of 60,386 cars. Arch rival Toyota, Ford and General Motors were all placed below Honda. Further, Honda's entire sedan range at one time (5 years back) - the City, Civic & Accord - were No.1 in their segment. Even the CRV topped the premium SUV segment in some months, outselling the diesel Ford Endeavour at times. Honda was, perhaps, one of the few manufacturers that led each and every segment it was present in.
The last 3 years, however, tell a different story. Honda just sat by the sidelines and watched as newer brands (including rival Volkswagen) & cars flooded the market. No change in strategy from the boys in Noida. Then, Indian petrol prices increased by over 50% in the 2 years from May '09. That Honda goofed up the Jazz' pricing & missed an opportunity at volumes is bad enough. But in recent times, the Honda City - the brand's sole segment leader - was overtaken by the Volkswagen Vento as well as the Maruti SX4 (rejuvenated by its latest diesel avatar). Despite losing market share, the Civic's price has only gone up, and the car now sits well behind competitors like the Toyota Altis & the Chevrolet Cruze. The Skoda Superb brought an unbeatable value proposition to the 20 lakh rupee segment (
Link to Thread). Honda continued to sell the Accord with a sparse level of kit. Net result? Forget the Superb; in March 2011, the Accord was outsold by the notably more expensive C Class & 3 series. Yet, the most shocking is the positioning of the CRV. The previous-generation CRV cost 16.xx lakhs (ex-showroom Delhi) in 2005. In 2006, the current gen CRV was launched @ 18.4 lakhs. Today, that same AWD MT variant retails at a whopping 24.xx lakhs, and that's ex-showroom! On-road is more like 30 lakh rupees.
While the Indian car market grew by 30 % odd in the most recent financial year (April 2010 - March 2011), Honda actually
lost market share points. And from its No. 5 position amongst Indian car manufacturers in 2007, Honda ranked No. 9 in March 2011, and No. 11 in April 2011. Everyone has grown in the last 3 years...every car manufacturer, except Honda. Sure, Honda currently has some supply issues due to the Japanese tragedy. But clearly, that's a temporary situation and not the real problem. March 2011 factory dispatches were completely unaffected by the Japanese situation.
Let's run a SWOT analysis on Honda's current situation, and have a constructive discussion on the brand's way forward.
Strengths
- Brand Honda has a huge following in India. Just like one can't go wrong with a Maruti for 5 lakhs, the perception is the same for the 9 lakh rupee Honda City. A fuss-free ownership experience is guaranteed.
- Generally fuel efficient & spacious; two factors Indians love. The Jazz & City, especially, are fuel efficient cars, and the most spacious from their segment as well. The Civic surprises many people with smart interior packaging, while the Accord can take the fight to the Mercedes E-Class for comfort.
- All-rounded products. Honda's are usually fast & fun to drive, supremely reliable and require little maintenance.
- Safety : Insists on selling all of its cars with ABS & Airbags as standard.
- Contemporary line of products. Honda sold 3 entirely different generations of the City in only a decade (OHC, NHC and ANHC). Honda doesn't sell outdated cars in India; its product range is as contemporary as they come.
Weaknesses
- NO DIESEL! Petrol is priced stratospherically high today, and even those cars owners with deep pockets feel the pinch on every full tank bill. I reiterate that Honda is the only manufacturer without a diesel engine in its lineup, and that is the biggest disadvantage today. Honda has merely 1 diesel engine worldwide. That's the outcome of being overtly dependent on the USA market, I guess.
- Poor business strategy. Whoever signed off on the Jazz' final price was obviously out of tune with market conditions. The poor Jazz is so over-priced that it was destined to become a market dud, and currently sits at the bottom of the segment. While competition offered new cars with diesels & a long list of features, Honda did not react at all. Then, for some reason, their cars seem to suffer fatter prices hikes than the competitions.
- Poorly equipped cars for the price. The Jazz wasn't equipped with a 200 rupee parcel tray on launch, my '07 Civic doesn't have a USB / iPod connector, the Honda City was introduced without climate control / alloy wheels / a CD player (!!!) and the Accord...well, looks naked next to the Superb's class-leading equipment list.
- Honda was once a technological tour de force. The first to bring variable valve tech, excellent automatic transmissions and more with the original Honda City. But where is the technological innovation today? Where are the direct-injection petrols, dual-clutch transmissions and turbocharged small capacity petrol motors that your competitors have already introduced in the market?
Opportunities
- BRIO! I hope Honda has learned its lessons and will give the Brio a VFM pricetag. The upcoming Brio hatchback has the potential to give Honda India previously unseen volumes. Simply put, the Brio is make it or break it, in terms of the mid-term future for Honda.
- Jazz : This girl's never going to move at the current pricing, Honda. Swallow a bitter pill, cut the price by 1.0 lakh and watch her fly out of showrooms. No one has a problem with the product; each ownership review speaks highly of the car's quality & capability. Unfortunate that a nearly flawless product is made to fail due to flawed business strategy.
- Diesels. When Maruti - a onetime strong opponent to diesel cars - can say "If you can't beat 'em, join 'em" and tied up with Fiat for diesels, why can't Honda outsource oil burners? Plus, the Civic & Accord can make use of Honda's own 2.2L CTDi diesel that it sells in the UK.
- Add better equipment levels to the City, Civic & Accord. Don't make them look sparse in all product comparisons. This is the easiest to manage, and can be accomplished in a quarter.
- Honda seldom offers discounts, at least officially. Well, pick a leaf from BMW's super aggressive strategy. Offer 0% finance deals for slow movers like the Civic & the Accord.
- Dual fuel variants. There's no better time to introduce factory-installed, precision-engineered, CNG & LPG variants. Build them and then, market them hard.
Threats
- Volkswagen & Hyundai, both make for exceedingly formidable competition. When I drove the Vento, I commented that this is the first sedan capable of going against the Honda City. And I was right. VW has the brand power to compete with Honda, mega financial muscle and diesel engines. Hyundai has already overtaken Honda at the global level. Quite honestly, there is no difference in overall quality & reliability between Honda & Hyundai now. Hyundai's cars also have a premium attached to them, but they have diesels and are far better equipped.
- Petrol prices are only poised to rise higher. Another round of rate revisions is likely in the near future.
- Over-crowded segments. The Indian car market has defied global trends by posting phenomenal growth rates through 2009 - 2011. Every global car manufacturer is strengthening Indian operations. Competition is going to get fiercer from Maruti, Hyundai, Toyota, Volkswagen, Ford, Skoda & Nissan.