re: Honda slashes price on Jazz as well ? EDIT: Launch pics of new Jazz Pg.56 I made this analysis about 6 months back in another Honda Jazz thread. I seem to have predicted this move somewhat early, just that did not "expect" it to happen all this quick! :-(
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Feb 2011:
To date, I think honda has made about 21,000 Honda Jazz(see narration below). I am trying to figure how much of that is unsold and the size of the problem Honda has in its hands. My GUESS is that Honda has about 15000 Jazz cars lying in their parking lots- manufactured & un-sold.
And now thats what, a 1000 crore(at Rs.7 lacs invoice value) problem? Considering the backlog, is it safe to assume now in Feb 2011, they would have COMPLETELY stopped production of Jazz until stocks are sold? It seems difficult to believe that if I want a 2011 model today, I cant get it. So I am guessing some sort of intelligent production plan for 2011 might be underway but what about all those unsold cars?
Any ideas how we can go about crunching these numbers from publically available sales figures with more authority? Can anyone point to sales figures for Jazz in one place:
1. 2nd half of 2009
2. Full year of 2010
3. Jan 2011
Narration for 21000 cars made so far:
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Assuming production launch around July 2009, Honda Jazz has been in manufacture for about 19 months. I have seen figures ranging from either 1000 cars/month to 1666 cars/month ( from comments about 20k cars/year target). I am quite sure they would have ramped down the production or completely halted it for the last 6 of those 19 months. Lets assume an average of 1333 cars producded for the first 13 months and a 50% production of 666 cars for the last 6 months.
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I have mined Honda's website for Jazz sales figures for the past 20 months(2009: 7 months; 2010: 12 months, 2011: 1 month).
Based on that analysis, I can conclude that Honda has officially sold a total of 11,857 Jazz cars for the past 20 months.
Assumption1: Previously I speculated that Honda has manufactured about 21000 Jazz cars. I stand by this but its speculation never the less. In fact I am confident that this figure can only turn out to be higher in truth -- in fact as high as double the current number -- and not lower due to assembly line economics. (Honda has previosuly stated that about 2000 cars/month production capacity has been established. To run the assembly lines at less than 2000 cars/month load would result in other losess)
Impact: Note that, the sales figures quoted above is Honda-Dealer sales. We dont know the off-take of dealers stock by customers. Assuming they have sold bulk of their 11,857 cars, that leaves about 9143 cars(21000 - 11857) manufactured and unsold by Honda.
Assumption2: If you want to speculate, I would add another 2500 cars on top of 9143 Honda stock, as unsold dealer stock. Thats a speculative total of about 11643 Jazz cars lying with dealer + honda stock yard.
Conclusion: There really aren't any, actually. Just some more guesess from my side. Never the less, here it is for what it is worth:
1. There are anywhere between 9143 to 11643 Honda Jazz cars lying unsold with dealer + honda, assuming a total production of 21000 cars so far.
2. This unsold figure can turn out to be three times higher(30643), if Honda in fact produced Jazz 40,000 cars instead of 21,000 as per their monthly target of 2000 cars/month up untill Jan 2011. But I discount this higher figure based on common sense that with an average monthly sales figure about 457 cars, it would be insane for any company to produce 40,000 cars in 20 months!
3. So I would stick by the range suggested earlier of 9143 to 11643 unsold cars as on date. Even with this lower figure, its unclear to me how Honda plans to liquidate these stocks with an average sales figure of 457 cars/month. I cant believe the dealers would now all of a sudden be willing to invoice 2000 Jazz cars/month. All things being equal(no price cuts, no dealer incentives etc.), at this rate, it would take another 25 months to liquidate the current level of stocks. Not being an automobile industry guy, I dont know how big this problem(stock build-up vs off-take) is and how commonly it occurs in the industry but it seems clear its a non-trivial problem with a price tag of about 640 to 815 crores of un-sold inventory with a cash-flow pipeline of 25 months. The interest cost alone to service that 850 crores investment would so huge that would rule out any further discounted sales.
Given the size of them problem is it then possible:
1. That Honda would dismantle the built Jazz cars to utilize the shared components into Honda city to recover costs faster?
2. Slash the prize of the Jazz drastically?
3. Export Jazz 1.2 from India?
4. Take the hit, absorb the inventory and bring in a 1.5Ivtec at the same cost for the all-new Jazz?
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