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
Honda in India
Honda first entered the Indian market in 1984 through a joint venture with Kinetic Engineering Limited (Kinetic). The JV called Kinetic Honda Motors Limited (KHML), was set up to manufacture scooters. The partnership's flagship product, 'Kinetic Honda' was considered a game changer in the Indian scooter market with several features like variomatic gearless transmission, self-start, auto choke, etc. Honda entered into another joint venture the same year with the Hero Group 10 called Hero Honda Motors Limited (Hero Honda) to manufacture motorcycles. The Indian motorcycle market was very sluggish at that time. Many people preferred scooters to motor cycles as scooters were perceived to be safer and more suited to the Indian roads. Hero Honda introduced a newer motorcycle called Hero Honda CD-100 in1985 which changed the face of the two wheeler market in India....
In 2011, Honda India started to face new challenges in the form of increased competition for and decreasing sales of all of its models sold in India from 2011. Some of the new competitors who entered the Indian automobile market started to pose stiff competition to the company and overtook it in some product segments where it had been a leader. In 2011, VW's Vento replaced Honda City as the top selling mid-size sedan in the Indian market within 8 months of its launch. Honda India was able to sell only 4,315 Honda City cars against 6,839 units of VW's Vento for April and May 2011. Honda India had also been experiencing a decline in the sales of its other models sold in India. Industry observers said that several factors were responsible for the declining fortunes of Honda India.....
Setting the Strategy Right
Some analysts said that the main reason for the decline in the performance if Honda India was its lack of a long-term strategy for a market like India. They said Honda had grown too complacent due to the good performance of its high-end sedans and the brand value it enjoyed in the Indian market. The Indian market was traditionally dominated by small cars due to the low income levels of its population. Nearly 70 percent of all the cars sold in the Indian automobile market in 2011 were small cars. Honda India failed to release a small car suitable for the Indian market despite selling some small car models in other countries like Japan. The lack of a small car suitable for the Indian market also limited the reach of Honda India...
Continuing with the Strategy Shift
In August 2012, Honda completely bought out the stake in Honda India and made it its 100 percent subsidiary. After the stake sale, Honda Siel Cars India Limited was renamed as Honda Cars India Limited. Honda wanted to have total control over its Indian operations to further improve its fortunes in one of the most difficult automobile markets in the world. As the demand for diesel cars in India remained high due to the subsidy given by the government, Honda launched its first diesel engine under its new i-DTEC series in April 2013. i-DTEC was launched in its newly developed sedan called Honda Amaze...
Price Cuts and other Initiatives
Apart from launching new models, one of the important steps that Honda India took was to drastically reduce the prices of its vehicles in India. It slashed the price of its flagship sedan, Honda City by Rs. 44,000 to Rs. 66,000 (depending upon the model) in June 2011 to compete better in the Indian market. In August 2011, Honda India released a new version of its Honda Jazz which was priced nearly Rs. 150,000 lower than its previous version. 33 Honda India said that more localization of the components used in its vehicles and increased economies of scale were the reasons for the reduction of prices. The company had set up a research and development center in India in 2009 to source its components locally and also to share components across its product range...
The Road Ahead
New launches from Honda India started to give good results to the company in 2014 in the form of higher sales and market share. The demand for many of Honda India’s newly launched models like Honda Amaze and Honda Mobilio meant that its plants in India reached their maximum capacity. The demand for many of its models exceeded the expectations of the company and Honda India started second shifts in its manufacturing plants. It also postponed the launch of the third generation Honda Jazz in the Indian market due to the non-availability. Honda India also started focusing on improving customer satisfaction and quality to improve its performance in India.....
Exhibit I: Classification of Indian Passenger Vehicle Market
Exhibit II: Honda India’s Cars Launched in India
Exhibit III: Models Sold by Honda India in 2014 and Nearest Competitors (Figures in INR Thousands)
Exhibit IV: Chart of Petrol Prices in India from 2002 to 2014 (Prices in the Country’s Capital Delhi)
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