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Honda has gained a decent amount of brand equity for itself in the country. But how is Honda dealing with the current slowdown? The India head speaks out...
When do you see the auto sector bouncing back from the current turmoil?
I wish I knew that. But at least in the case of India, since almost a year back when the stock values were suddenly falling down, the impact on the Indian economy was comparatively lower in comparison to that of the global downturn. To be frank the year 2008 was quite a difficult year for Honda. And in comparison the negativity of various issues has come down considerably in various markets like United States, Europe, Japan or China.
Therefore we are already seeing a silver line of hope as inflation is coming down and interest are also following the downward trend along with the consumers’ confidence gradually picking up. Of course we cannot be over optimistic but at least the Indian auto market has much lesser problems.
How has the economic downturn impacted your business?
It has impacted our business a lot. Particularly as we are focusing more on the so-called premium segment and those customers’ profiles are quite connected to the global economy. Therefore this target segment becomes cautious of spending their money in these hard times. But since November when we launched the next generation model of Honda City our sales are gradually picking up.
What are your strategies to out the current impact on your business?
We are aiming for lean operations and we have already adjusted our productions. We have capacity of two shifts, thus we can produce 385 units a day but in the current market situation we are running only one shift a day, thus producing only 200 cars a day. This one shift production strategy has been implemented since January this year and would continue for the next six months or may be more. I hate the over piling of stocks. We always want to keep the demand of our products higher than the supply.
How has catering to the Indian market helped Honda’s growth?
Honda is one of the few auto manufacturers who has been able to post a positive result in the current downturn unlike the Americans and other global auto makers. This is primarilly because of our diverse portfolio, we have other products such as motorcycles and scooters. In fact, if you take a look at the Hero Honda and HMSI’s performance we are doing pretty well in the country.
For the FY 2009 Hero Honda is likely to register a record sales of 3.6 million units whereas HMSI is likely to sell off 1 million units even in the current market situation. This is because though our car market customers are well connected to the global market but there are number of Indian customers who have not been much affected by the global slowdown.
The rupee has lost a lot in value. How much of your financials have suffered because of this?
The devaluation of the rupee has definitely impacted our business a lot. As we import around 25% of the required components from either Japan or Thailand for our Indian manufacturing units, the cost of these components have increased in the past few months due to the depreciation of the rupee and are adding to our total input costs. Which has resulted in forcing us to adjust our retail price accordingly.
Will Jazz be launched on schedule and what are other future launches?
We are very much aware of the fact that our product attracts the Indian consumer and many of the Indian customers are looking forward to the launch of our new product Jazz. So, we plan to go for the launch of Jazz as per schedule and it will hit the Indian market more or less in the month of June. We normally do not like to delay our product launches. Our trial productions are already in the process.
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Source : IIPM Editorial, 2009
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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