Lower diesel volumes have negative impact: Yoichiro Ueno

Interview with president and CEO, Honda Cars India

Japanese auto major Honda has seen its India volumes slip for several months now. Honda’s decline is in sharp contrast to the 10 per cent growth in the passenger vehicle segment. Yoichiro Ueno, who took charge as president and CEO at Honda Cars India in April this year, says in a media interaction that growth will come back by the end of this year. He raised the issue of differential tax structure, claiming it would prevent companies like Honda from bringing the entire global line-up to India. Edited excerpts:

How is the Indian market placed vis-a-vis other markets for Honda?

India is growing faster than other economies and is more stable. Due to the economic situation, the car market in India is also showing steady growth. Last year, India was the fifth largest market after China, the US, Japan and Germany. India is showing the highest growth among these countries. It is believed that India will overtake Germany. In motorcycles, India has become the largest market for Honda for the first time this year, overtaking Indonesia.

How do you see the competition here in the context of multiple players operating here?

India is a competitive market with a lot of players. Manufacturers see a strong future potential in this market. They are putting a lot of resources and investment here to bring more products.

Why is Honda’s car volume not growing? When will the trend reverse?

Honda’s sale has been a bit flat since last year. We had shown significant increase in the previous years. I admit that the current sales pace is a bit under our expectations. Maybe, this is due to the competitive market situation. But, there is a difference between wholesale and retail figures. What producers announce is only wholesales. Last year, our retail sale was a bit below wholesales and dealers were left with unsold stocks. Due to high dealer inventory, this year, we decided to do a correction. This year, the wholesales are a bit lower than the actual retail. Honda has some room to further increase sales. We are putting in a lot of effort and measures to expand sales. Towards the end of this year, Honda’s sales will start showing growth. We have some plans to reinforce our model line-up.

What is your view on differential tax structure on cars? How do you view the GST?

A lot of cars are sold in the market. But, compared with the size of the market and diversity of customers here, the cars on the road are a bit monotonous and lack variety. Many cars are on sale but actually, cars that are selling certain volumes are limited. It is partly because of the tax structure. The government likes to promote smaller cars. Tax differentiation (between small and big cars) is so huge that customers get limited line-up of products compared to other markets. We have a lot of models outside. But, because of unique restrictions in India, it is difficult to bring those models. If the government can moderate the gap, manufacturers can bring more variety. We appreciate the effort of simplification of tax through GST (goods and services tax). But, there is speculation that car prices will drop.

How has the fuel mix for Honda cars changed due to regulatory issues?

We saw a big shift to petrol across models. The average swing in favour of petrol is 10 per cent. Now, 75 per cent is petrol. Fortunately, all our models have a petrol option. So, we are in a better situation. There is some production flexibility between petrol and diesel engines at our plant. The challenge is investment amortisation. The investment to produce certain volume of diesel cars was large. However, the amortisation per unit is increasing due to low volumes and has negative impact.

A strong small car presence is needed to get volumes in India. That is missing in Honda...

If we can develop more small cars, it will be better. Unfortunately, our research & development (R&D) has to work for global markets. Honda’s policy is to have a global line-up with some modification. If regulations of Indian market become more universal, customers will be able to enjoy more global products.

What will be the role of R&D set up in India? Will you develop a model in India from the scratch?

R&D is currently focused on increasing localisation and producing parts here. They also have some members who are studying the preference of Indian buyers. But, since we always develop cars for the global market, our centre can work with global R&D to develop new models.