Sharmistha Mukherjee/New Delhi – 2012-09-23

Japanese auto giant Honda Motor Co Ltd is set to introduce its first diesel vehicle in India — an entry-level sedan based on the Brio platform — in the next financial year.  The move comes at a time when Honda is battling slowing sales of its petrol vehicle.

The move is significant as its Indian subsidiary, Honda Cars India Ltd, is battling slowing sales as its portfolio of petrol vehicles is becoming less attractive in a market which is increasingly preferring diesel-powered vehicles.

The company is likely to invest close to Rs 3,200 crore to commence assemblying diesel engines and introduce diesel variants in a bid to fast ramp up its operations in the country.

The new diesel engine will be sequentially adopted to new models the company has scheduled for introduction in the market starting 2013-14. “The new diesel engine will be assembled at our second unit in Rajasthan. It will be fitted on the entry-level sedan slated for launch next year and on new models thereafter. It will not be adopted on to the existing products in our portfolio,” said Jnaneswar Sen, senior vice-president, sales and marketing, Honda Cars India.

Outlining the company’s plans till 2017, Takanobu Ito, global chief executive officer of Honda Motor, said in Tokyo today: “In India, an all-new diesel engine will be adopted sequentially to new models, starting in FY2014. In addition to the high fuel efficiency, the cost competitiveness of the all-new diesel engine will be enhanced through local sourcing and local production to make new diesel models more affordable for customers.” Overall, Honda Motor aims at doubling sales in emerging markets, including India and China, to 3 million units by 2017.

To bring in the numbers, Honda Motor is set to introduce the all new Fit (Jazz) in 2013. Over the next two years, the new City and small sports utility vehicles based on the Fit platform would be launched. “In Asia, in order to compete in and win in highly-competitive low-price markets and fulfill the diverse needs of customers, in addition to the all-new Fit Series, Honda will add sedan-type and utility-type models utilising the platform of the Brio, Honda’s strategic model for Asia,” added Ito.

Some of these products will find their way into the Indian market over the next five years. While the entry-level sedan would hit Indian markets next year, a timeline has not been determined for the introduction of the utility vehicles, Sen informed.

Honda Cars India has seen market share dip over the decade due to increased competition from global players. The company’s lack of diesel engines has added to its woes in the domestic market. Diesel is 31 per cent cheaper than petrol in the country, which has made an increasing number of consumers opt for diesel vehicles.

According to industry estimates, in the first five months of this financial year, sales of diesel vehicles soared 54 per cent to account for 57 per cent of the passenger vehicle industry in India, while off-take of most petrol-driven variants dropped by over 20 per cent. In this period, Honda Cars India’s sales have grown 54 per cent to 29,932 units though the growth has come on a low base. Honda’s operations were severely disrupted for a major part of the last financial year due to an earthquake in Japan and floods in Thailand.

In August, Honda Cars India’s sales dropped 20.80 per cent to 5,470 units.

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