Sector shrinks, but Honda grows, thanks to Amaze

Though the passenger car market shrank for the sixth consecutive month, Honda Cars India grew 20 per cent in April over the same month last year.

The spike is being attributed to the launch of Amaze, the Japanese carmaker's entry level sedan, which also has a diesel variant, and which sold 4,852 units.

"Amaze has received tremendous response from customers despite the slowdown in the industry," says Jnaneswar Sen, Senior Vice President, Sales and Marketing at Honda Cars, in a press note. "We are confident that Amaze will drive our growth in this fiscal year."

Sales of Honda's hatchback Brio fell from 3,917 to 1,628 units, and City from 3,432 to 1,917 between March and April.

Other carmakers like Hyundai and Toyota posted declining sales. However, Maruti Suzuki, India's largest car maker by volume and revenue, reported a growth of 4.9 per cent.

Analysts believe that a product launch during a slowdown keeps up the sales momentum.

"Whenever you launch a product, it helps you hold on to the sales numbers," says Abdul Majeed, who heads the automotive practice at audit and consultancy firm PricewaterhouseCoopers.

The bigger challenge that Honda will face will be when growth returns to the sector.

The company will be over-dependent on the Amaze in the short term, as it does not have a total production capacity of more than 10,000 units a month. Once models such as Brio and City recoup, it may be difficult for the company to meet demand.

Honda has, however, invested Rs 2,500 crore to almost double it capacity to 240,000 units annually, with a new plant coming up in Tapukara, Rajasthan by next year.

At the launch of the Amaze early in April, Sen had noted that the added capacity would help Honda strengthen its position in India and also play a critical role in the exports of engines. Since the start of operations, Honda has invested Rs 6,700 crore in India.

It is likely that Honda is capitalising on the dieselisation and low price point of the Amaze. After all, Sen believes that it will take about 20 months before reverse dieselisation happens and sales of petrol cars normalises.