Going Bullish: Honda to compete in small car segment in India

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"We plan to start our small car venture in India with this plant," said Satoshi Aoki, chairman, Honda Motor Company, referring to its subsidiary Honda Siel Cars India's (HSCI) second facility at Tapukara, Rajasthan, which laid its foundation stone, July 1.

The car will compete with premium end hatchbacks like Maruti Suzuki Swift and Hyundai Getz, Aoki hinted.

"We are studying the Fit and City models for the cheap small car segment. But we have to make sure that a cheap small car will have Honda characteristics. However, our mini-vehicles are priced at $9,000, and making a car with one third of that price would be a challenge," he said.

"We are entering the US markets with our diesel engines in the next three years. Our future markets are in Japan and Asia. With the Indian government's commitment to cleaner fuels, we are studying the prospect of bringing in a diesel engine in the country," Aoki added.

"The North American business is very important to us, but we like to add business coming from other markets like China, India, southeast Asia and Brazil, so we won't be dependent on a single market," he said.

"Definitely our aim with the small car is to qualify for the excise duty benefits on the 1.2 litre petrol engine and 1.5 litre diesel engine with the size of 4000 mm.," Masahiro Takedagawa, president and CEO, HSCI, said while clarifying that the car will be primarily for domestic sale. "We are targeting at localising the small car by almost 90 percent. After studying the demand, we will look at exporting it to other markets since it's going to be a global product."

The new 600 acre facility, which envisages an initial investment of Rs. 1,000 crore, will have an initial annual capacity of 60,000 units, which will be later peaked to 2,00,000 units. The plant, besides manufacturing the small car, might also produce existing models to lessen load on the existing 150 acre Greater Noida plant.

The facility will also house an R&D unit and a components plant.

Rising incomes and new launches are boosting sales of passenger vehicles in India, which are forecast to nearly double to 2 million units in sales by 2010.

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