Honda Hopes to Gain Greater Share in India

Honda Hopes to Gain Greater Share in India
by Evander Klum
Honda, maker of quality Honda shocks, is hoping to avail a greater share of the Indian small car market. It is, however, unlikely to sell automobiles at the cut-rate prices that rivals Tata Motors and Renault are promising for upcoming models.
Japan's second-largest carmaker, which inaugurated its second plant in India, in the northern state of Rajasthan on Sunday, plans to roll out its first small car from the plant in 2009.
Tata Motors plans to sell a car priced at 100,000 rupees ($2,459.95) from next year that would make it India's most low-cost automobile.
Nissan CEO Carlos Ghosn said earlier this year that his company also plans to manufacture a $3,000 car for the Indian market.
However, Satoshi Aoki, Honda's Chairman, told reporters at the plant in Tapukara that building a car that is cheap would be difficult for Honda. He said their mini car in Japan costs nearly $9,000 and to produce something at one-third the cost will be rather challenging. At present, Honda controls 5.5 percent of the Indian market.
On its latest plant, the company is spending $491 million. It will have a yearly capacity of 200,000 units. Furthermore, Honda is expanding capacity at its plant in New Delhi and plans to produce 150,000 vehicles yearly by the end of 2010. Officials said that Honda's Indian small cars will contain 90 percent local parts.
Aoki said that the North American business is very important to them, but they like to add business from other markets like China, India, Southeast Asia and Brazil, so that they would not be dependent on a single market only.
Predicted to double to 2 million units by 2010 are the passenger vehicle sales in India, where 8 out of every 1,000 people own an automobile. In India, small cars account for almost 75 percent of the sales. Thus, automakers such as Suzuki and Hyundai are given the opportunity to gain a huge share of the market.
As of last year's allocation, the federal government gave a hike to small car manufacturers by trimming down excise taxes from 24 percent to 16 percent on cars shorter than 4 meters with gasoline-powered engines smaller than 1.2 liters.
Aoki continued that Honda was likely to upwardly revamp its profit forecast for the 2007 fiscal year because of the yen's overwhelming depreciation against the dollar. The yen's decline will boost repayments from markets like the U.S., which accounts for 70 percent of Honda's profits.
The Japanese company said in April that its profits would decline by about 3 percent to $4.7 billion on an anticipated appreciation of the yen and rising prices of commodities such as steel and aluminum.