Honda in India: New Challenges
Case Code: BSTR468
Case Length: 14 Pages
Period: 2000 - 2015
Pub Date: 2015
Teaching Note: Not Available
Organization: Honda Cars India Limited
Themes: Competition, Emerging Markets
Abstract Case Intro 1 Case Intro 2 Excerpts
In November 2014, Honda Cars India Limited (Honda India) announced that it was postponing the launch of its new generation Honda Jazz car in India. The announcement was prompted by the company's lack of surplus manufacturing capacity following the success of its newly launched models, the Honda Amaze and the Honda Mobilio. From the year 2011, Honda India had been facing tough competition from other automobile manufacturers like Volkswagen (VW) and Hyundai Motor India Limited (Hyundai) due to the lack of smaller cars that were popular in India. The company failed to come out with diesel versions of its cars in India. That meant some of the popular models of Honda India like Honda City, which had been a market leader in its segment for 13 years in a row before 2011, lost their market share. At the end of 2011, Honda India initiated several measures to halt its declining performance. It started to source the majority of its components from the local market to keep costs down. Honda India also reduced the prices of some of its cars drastically to narrow the price gap with its rivals.
Barring the City sedan, Honda India had been experiencing a decline in the sales of all its models in India from 2011. Analysts attributed Honda India's declining performance to a number of reasons. The most important reason was the deregulation of petrol prices in India in June 2010. This resulted in a big price difference between petrol and diesel due to the subsidy enjoyed by the latter. Also, unlike other automobile companies in India, Honda India imported some of the crucial components used in its cars and this made its products more expensive than those of competitors. The declining Indian Rupee in 2011 made imports expensive and compounded the problems for the company. Besides, disruptions in the supply of components due to the natural disasters that struck Japan and Thailand in 2011 forced Honda India to halt production for some days and this severely damaged its reputation in India. But some analysts opined that the main reason for Honda India's problems was the lack of a long-term strategic vision. They said that the company had grown too complacent due to the high reputation it enjoyed in the Indian market till competition closed in...
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