Honda Cars India plays a competitive pricing game with the new City

Honda aims to fill the wide gap in entry-level sedans that include Ciaz and Hyundai Verna as well as upper-level versions such as the likes of Honda Civic, Skoda Octavia and Toyota Corolla Altis.

By keeping the price of its latest City almost on a par with the older generation car, Honda Cars India (HCIL) is playing a competitive pricing game for a market that is super-sensitive to hikes in the current economic scenario.

On Wednesday, HCIL launched the fifth generation model of the City. The flagship sedan’s prices range from Rs 10.89 lakh to Rs 13.14 lakh for the petrol version and Rs 12.39 lakh to Rs 14.64 lakh for the diesel one. The new City’s automatic petrol version is only around Rs 40,000 more than the older version.

With it, Honda aims to fill the wide gap in entry-level sedans that include Maruti Ciaz and Hyundai Verna as well as upper-level versions such as the likes of Honda Civic, Skoda Octavia and Toyota Corolla Altis. 

“Since the outbreak of coronavirus (Covid -19), customer preference has been changing. The demand in tier-2 and tier-3 cities has been growing. Increasing sales in these regions will be our priority,” Gaku Nakanishi, president and chief executive, Honda Cars India, told Business Standard. He said that the product pipeline and capital expenditure from the pre-Covid phase stays the same. “Our electrification strategy will start with the hybrid model and it remains on track for next year. We believe the hybrid is the most efficient bridge to EVs (electric vehicles).”

Identifying the customer needs correctly is one of the biggest challenges for us at the moment. Nakanishi points out that a trend like work from home could change preferences. Office goers may no longer want to live in crowded cities and instead prefer smaller towns. Therefore, demand will shift. Also, an aversion to public transport will lead to more people owning personal vehicles.

“We are trying to understand all these changes,” he added. The new City is bigger and more spacious than its predecessor and comes in automatic transmission for the petrol variants. It also offers lane assist technology that first came in the higher-priced Honda Civic.

Interestingly, Honda will also sell the older fourth generation City side by side with the new version, thus segmenting the model into two broad categories.

Puneet Gupta, associate director at IHS Markit, a sales forecasting and a market research firm, points out that HCIL needs to bring in more aggression and needs a turnaround strategy. “In a competitive market like India, car manufacturers need to be very agile in terms of new product launches. They need to align their new models and features and technology to consumer expectations and that too at a competitive price,’’ said Gupta.

Kaushik Madhavan, vice-president of Mobility at Frost & Sullivan, said that historically, there has been a clear distinction between the sedans, for example, between the Honda City and the Hyundai Elantra or the Toyota Corolla and the Honda Accord with regard to features and technical specifications. “Now you see features also being offered in lower segment sedans, and the new City for one will see a lot of value addition,” he said.

The City has been a best-seller for Honda in India for over two decades with annual sales of 20,000 units, only surpassed by the Amaze, another compact sedan.

HCIL senior vice-president and director Rajesh Goel said, “The City was a product conceived and designed with the Indian customer in mind and has tried to bring in contemporary (current) technology to every successive generation.”