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Honda to launch Accord, set up scooter JV in India

Honda Motor Company of Japan will launch its high-end luxury sedan Accord, priced at Rs 1.75 million, by the end of 1999. Other models from its stables abroad are also being studied as probable launches for India. Also on the anvil is a joint venture for Honda scooters.

The Accord would be targetted at the top-end segment of the mid-size segment of the Indian passenger car market, Teruo Fujisaki, said president and CEO of Honda Siel Cars India Limited, a subsidiary of Honda Motor Company.

It may be recalled that the company had initially planned to produce the Accord in India but had later dropped plans for the same and intends to go ahead with imports of completely built units of the car. The decision to this effect was taken in view of the shrinking demand for mid-size and luxury cars in India.

HSCI, he said, has the Foreign Investment Promotion Board approval to introduce vehicles in India through direct imports and test market them here. ''Based on the response to these models, we would take a final decision on producing these cars here.''

However, Fujisaki refused to divulge details on the particular models which were being studied for India. ''We are looking at a whole lot of models but are yet to decide on the next model after Accord.''

HMC was founded in 1948 and has made inroads into the Indian market with its generators, scooters, motorcycles and cars through different joint ventures.

HMC of Japan presently holds 95 per cent stake in the joint venture while the remaining five per cent is with Siddharth Shriram-run Siel Limited.

HSCI has set an export target of $ 1million for the current fiscal.

Export of components from its unit in Surajpur in Uttar Pradesh would contribute to a major part of this target. Besides, the car-maker is also despatching Completely Built Units of the City from India worth $ 90,000, Fujisaki said.

The first lot of ten CBUs of the City was despatched for Sri Lanka from the unit today. ''The cars would be sold in Sri Lanka through the Honda worldwide dealership. Besides, we are also targetting other countries like Bangladesh, Mauritius, Africa and South America as export destinations for the car,'' he added.

In April 1999, HSCI had exported over 1,000 units of steering wheels to Thailand. Efforts, he added, are underway to develop other markets for exporting components as well on original equipment supply basis for Honda automobiles in the southeast Asian markets.

Although the company is expecting repeat orders for the City from Sri Lanka, Fujisaki said exports are not a priority for the company. ''We want to first concentrate on the domestic market.''

According to Fujisaki, HSCI and Honda Motor fully appreciate the requirement of the country to conserve its foreign exchange reserves, and respect the stipulations laid down by the government of India for the same.

''HSCI is, therefore, keen about increasing the quantum of exports from India to not only meet the MoU conditions but sustain the exports after it moves out of the purview of the MoU.''

The City presently has a local content level of 64 per cent which would be raised to 70 per cent by the end of this fiscal. ''This will help us move out of the purview of the MoU.''

Honda City, Fujisaki said, already meets the Euro-I emission norms and is capable of meeting the Euro-II norms.

''All the versions of City have been certified by the Automotive Research Association of India as meeting the year 2000 norms. We have already applied to the transport authority in the National Capital Region and are hopeful to get the go-ahead certification today.''

Regarding the Euro-II norms, the company is awaiting the ministry of surface transport announcement for seeking certifications.

HSCI sold 1,359 units of its mid-size sedan 'City' during March 1999, which dropped to 588 units in April. The company had closed the 1998-99 fiscal with total sales of 9,631 units. HSCI has, since its launch, sold 10,971 units.

Market feedback indicated that Honda City has achieved a market share of 22-23 per cent of the mid-size car market in 1998-99.

The sales performance of Honda City during 1998-99 and particularly in March 1998 is far more credible in view of the prevailing market and demand conditions especially in the premium car segment. The mid-size and luxury segment has been showing a negative growth trend in 1998-99 over the previous financial year.

The Honda City is being manufactured at its greater NOIDA facility in Uttar Pradesh, which has an installed capacity of 30,000 cars per annum (on two shifts basis). The total investment envisaged for the project is about Rs 8.5 billion in a span of five to seven years, of which Rs 500 million has been invested so far.

HSCI has 19 Honda exclusive authorised dealers (heads), which would be raised to 20 by next month.

The company expects to break-even on its investments in India in the 2000-01 fiscal.

Despite the volumes, HSCI has no immediate plans to localise engines and transmissions in India, Fujisaki said.

The company expects to achieve cash break-even and record operating profits in the current fiscal.

''We need to achieve a sales figure of 14,000 units per annum for cash break-even and 19,000 units per annum for net break-even. Looking at the present volumes, we expect to achieve these figures in the current and next fiscal respectively,'' he added.

HMC is planning to set up a new joint venture company in India with a controlling stake to produce its range of scooters.

Although the partner for the venture has not been finalised, Honda has decided to pick up the majority stake, Fujisaki said.

However, he stated that the Hero group, with which Honda has an existing joint venture to produce motorcycles, does not figure in the list of companies with whom talks are being held.

A feasibility study is being conducted by the parent company to finalise the site for the project, investments involved and probable roll-outs. ''Honda Japan has already set up project members for the purpose and they are presently studying the models and location for the project. A final decision on the matter would be taken within the next two months,'' Fujisaki added. He refused to divulge further details on the study.

It may be recalled that Honda had pulled out of its scooter manufacturing venture with the Arun Firodia-run Kinetic Engineering citing bad market conditions. However, it still is bound by a technical assistance agreement with Kinetic which allows the erstwhile joint venture to receive technical know-how, critical vehicle parts and access to export markets even after the transfer of Honda shares to kinetic engineering.

The scooters, now produced by Kinetic, are being marketed under the Kinetic brand name. ''The scooters which Honda will produce from the new facility would be sold under the Honda brand name,'' Fujisaki added.

However, he refused to divulge details on the models which are being planned to be introduced in the country.

UNI

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