City On The Move

YET another premium car is getting set to vroom on to Indian roads. Honda Motor Company's City. The luxury car designed for Asia is scheduled to hit Indian roads by January '98 and claims to have incorporated special modifications to suit Indian roads and conditions.

But the million dollar question that remains is whether there's space in the market. All the big guns—Suzuki, Daewoo, GM, Ford, Fiat, Hyundai, Mitsubishi—are already here, or will be within the next few months. And statistics about their performance aren't very encouraging. 1997-98 has been rather dismal with a 4.7 per cent growth as against 11 per cent in 1996-97. Therefore, the moot question—does India have a market for luxury cars with price tags of over Rs 5 lakh?

"There is a definite slowdown in the economy," admits Siddharth Shriram, chairman, Shriram Industrial Enterprises Limited (Siel), Honda's Indian partner. "But some industries continue to record satisfactory levels of growth. The auto industry is one of them. So we expect Honda-Siel to do well."

But Honda's immediate rivals, Daewoo's Cielo and the PAL-Peugeot 309, have fared badly in the current year. According to the Association of Indian Automobile Manufacturers (AIAM), Daewoo sold 1,197 Cielos during April to October '97 compared to 12,810 sold in the same period last year. Similarly, Peugeot sales dropped from 3,700 last year to 2,969. Sources in the industry claim that the other player in the segment, Ford Escort, has also not met targets. The only car doing well seems to be GM's Opel Astra.

Honda, however, is confident. Says K. Suzuki, chief operating officer, Asia-Pacific: "A lot of companies have launched products which do not particularly match the needs and requirements of the Indian market. The demands of the Asian customer, particularly the Indian customer, are different from those of the rest of the world. Companies that do not understand this have done badly. This is where we, being Asians, hope to score." As many as 119 important components, including the fuel injection system and the suspension, have been modified to suit Indian roads.This, along with 72 Honda ancillary companies setting up shop in India, to boot.

On the cards are not one but two City models—1.3-litre and 1.5-litre—in five variants. The ex-factory prices (road tax, registration and insurance not inclusive) range between Rs 5.8 lakh to Rs 7.5 lakh. City was first launched in Thailand last year, and later in Indonesia, the Philippines, Malaysia, Taiwan and Pakistan. The 1.3 litre version has a 90 bhp 16-valve engine, and the 1.5-litre a 100 bhp engine. Situated in Greater Noida, near Delhi, the Rs 850-crore project unit will produce 30,000 cars annually. According to Honda-SIEL president and CEO T. Fujisaki, the company aims to sell 3,000 cars by March '98, another 20,000 in 1998-99 and aims to take company turnover to over Rs 2,000 crore in three years.

This target may sound too ambitious at the moment with the Rs 5-lakh-plus car segment not faring well. And tax authorities keeping a close watch on luxury car owners is a further dampener for potential buyers. The silver lining, hopefully, will be Honda giving its rivals a good run for their money, and customers, better value for theirs.