'We hope to post double-digit growth this year, thanks to Jazz'

Q&A: Masahiro Takedagawa, president and CEO, Honda Siel Cars India

Tough market conditions and stiffer competition had eroded sales of the country’s fifth-largest car maker Honda Siel Cars India (HSCI) last year when sales dipped 16.5 per cent to at 52,000. But Masahiro Takedagawa, president and CEO of HSCI, feels that his company can record double-digit growth this year, owing to an improving economy and continuous government effort to boost spending. In an interview with Swaraj Baggonkar, Takedagawa highlights HSCI’s strategy. Excerpts:

For the first time in 12 years, HSCI has launched a hatchback in India (Jazz) but that, too, in the premium category. Your small car will only debut by 2011. Wouldn’t you have felt a lot more comfortable had you launched a compact car two years back?
Introducing a model is a big, big task as it calls for so many joint efforts. We have to have reliability, adhere to delivery timing and, the most important of all, we should be able to extract a certain return from the product. We do not feel that we are falling behind the competition, but are very much on track.

How do you gauge Honda groups’ success in India?
While we saw a huge slump in the sale of Honda products in the US (from 7 million to 1 million), our two-wheeler business in India — comprising Hero Honda and Honda Motorcycle & Scooter India (HMSI) — continued to post a remarkable growth. Our motorcycle business appears quite stable in Asia because of India.

There has been a flurry of launches since January and some of them are directly aimed at the markets you operate in. Do you see your sales under pressure this year?
There has always been competition for us but we are not scared of it. We hope to record a double-digit growth this year, primarily on account of sales added by the Jazz (starting at Rs 7.43 lakh, ex-showroom Mumbai). We will be happy if the Jazz achieves half the sales of the Honda City (the company sells 3,000-3,300 units of the City every month). Besides, we are also studying the possibility of assembling the CR-V here.

Although HSCI makes four models in India (City, Civic, Accord and Jazz) it does not have an engine plant here yet. Will the additional volumes of the new small car force you to consider it?
We feel it is necessary to have a yearly production of at least 250,000 units before we put up an engine and transmission facility. We are hoping that such a volume will come up. There will be an increased need for a plant when our small car gets ready for launch.

What is the typical size of the investment required to put up an engine plant?
About $100 million (around Rs 475 crore, according to today’s exchange rate) for the engine plant and another $50 million (about 237 crore) for the transmission plant. This is what is usually spent by Honda. We do make crankshaft and connecting rods in India at the moment.

How much localisation is there in your products currently?
We have about 70 per cent localisation for our products with the content being higher for the Jazz, which is about 77 per cent. A local engine and transmission plant will push it further by 5 per cent. Because we import 30 per cent of components, we are impacted by the rupee depreciation immensely.