Failure to Refresh its Offerings has Cost Honda dear, which has Lost Sales and its Leadership Position in The Executive and Premium Cars.
After the earthquake and tsunami ravaged Japan on March 11, the loss to the country has been beyond thousands of innocent lives. The Fukushima nuclear crisis triggered a loss of 1.25 trillion yen ($15 billion), forcing the exit of Masataka Shimizu as the President of Tokyo Electric Power Co., Sony Corporation faces a loss of a possible $3.2-billion in the just-ended fiscal and Japanese automakers have announced production cuts that is certain to bleed their bottom lines. Indeed, the past few months have proved to be one of the worst in the history of Japanese business. Out of all, the Japanese automobile industry, famous the world over for its just-in-time manufacturing, has been one of the worst hit. While Toyota lost its numero uno position as the world’s biggest seller of cars to GM — it sold 1.79 million vehicles worldwide in the first three months of the year (down 12% from the first quarter of 2010) as compared to GM’s 2.22 million — Honda was struggling to keep its business together in many major markets, including India.
Honda’s Indian arm, Honda SIEL, sold 1,990 units in the month of April 2011 logging a negative growth of 43% as compared to 3,507 units sold in the corresponding period in 2010. Following in the footsteps of its Japanese peers, Honda also announced a production cut in the Indian market necessitated by the limited availability of critical auto components from Japan. It was Toyota, which first announced a 70% cut in production. Honda followed with a 50% cut in production as both companies depend hugely on the imports of critical components like transmission systems and engines. Honda produced 3,530 cars in the month of April 2011 with a negative growth of 6.2% as compared to 3,767 units produced in the same period in 2010.
However, for Honda SIEL, the bad news is not limited to only the adverse impact on its supply chain due to the natural calamity in Japan. In fact, it also continues to lose ground to the competition in India. Much before the natural tragedy struck Japan, Honda’s Civic and Accord models had already lost their leadership positions in the executive and premium sedan segments to Toyota Corolla and Skoda Superb respectively. For the month of April 2011, Civic sold 253 units as compared to 776 units sold by Corolla. The situation for Accord is slightly better as it is still the second-largest selling car in its segment. Honda sold 194 units of Accord in April 2011 and trails behind Skoda Superb, which sold 243 units in the same period.
The current sales situation is a matter of concern for Honda which, after having established its presence in the sedan segment during 16 years of its existence in the Indian market, is now seeing its dominant position slip away to rivals. Its experiments in the hatchback and SUV segments have not been able to fetch high volumes for the company. Its hatchback Jazz failed to excite consumers, largely because of the hefty price tag as compared to the competition, which offered similar benefits at a lower price point. Honda sold 4,862 units of the Jazz in FY 2010-11 while relatively new products like Volkswagen Polo and Nissan Micra sold 28,904 and 12,302 units respectively. Similarly, CR-V, with its petrol only variant on offer, was not able to attract consumers for long amidst the rising competition in the SUV segment. The 22 units of CR-V sold by Honda in the month of April 2011 was worth peanuts as compared to 739 units sold by the segment leader, Toyota Fortuner.
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After the earthquake and tsunami ravaged Japan on March 11, the loss to the country has been beyond thousands of innocent lives. The Fukushima nuclear crisis triggered a loss of 1.25 trillion yen ($15 billion), forcing the exit of Masataka Shimizu as the President of Tokyo Electric Power Co., Sony Corporation faces a loss of a possible $3.2-billion in the just-ended fiscal and Japanese automakers have announced production cuts that is certain to bleed their bottom lines. Indeed, the past few months have proved to be one of the worst in the history of Japanese business. Out of all, the Japanese automobile industry, famous the world over for its just-in-time manufacturing, has been one of the worst hit. While Toyota lost its numero uno position as the world’s biggest seller of cars to GM — it sold 1.79 million vehicles worldwide in the first three months of the year (down 12% from the first quarter of 2010) as compared to GM’s 2.22 million — Honda was struggling to keep its business together in many major markets, including India.
Honda’s Indian arm, Honda SIEL, sold 1,990 units in the month of April 2011 logging a negative growth of 43% as compared to 3,507 units sold in the corresponding period in 2010. Following in the footsteps of its Japanese peers, Honda also announced a production cut in the Indian market necessitated by the limited availability of critical auto components from Japan. It was Toyota, which first announced a 70% cut in production. Honda followed with a 50% cut in production as both companies depend hugely on the imports of critical components like transmission systems and engines. Honda produced 3,530 cars in the month of April 2011 with a negative growth of 6.2% as compared to 3,767 units produced in the same period in 2010.
However, for Honda SIEL, the bad news is not limited to only the adverse impact on its supply chain due to the natural calamity in Japan. In fact, it also continues to lose ground to the competition in India. Much before the natural tragedy struck Japan, Honda’s Civic and Accord models had already lost their leadership positions in the executive and premium sedan segments to Toyota Corolla and Skoda Superb respectively. For the month of April 2011, Civic sold 253 units as compared to 776 units sold by Corolla. The situation for Accord is slightly better as it is still the second-largest selling car in its segment. Honda sold 194 units of Accord in April 2011 and trails behind Skoda Superb, which sold 243 units in the same period.
The current sales situation is a matter of concern for Honda which, after having established its presence in the sedan segment during 16 years of its existence in the Indian market, is now seeing its dominant position slip away to rivals. Its experiments in the hatchback and SUV segments have not been able to fetch high volumes for the company. Its hatchback Jazz failed to excite consumers, largely because of the hefty price tag as compared to the competition, which offered similar benefits at a lower price point. Honda sold 4,862 units of the Jazz in FY 2010-11 while relatively new products like Volkswagen Polo and Nissan Micra sold 28,904 and 12,302 units respectively. Similarly, CR-V, with its petrol only variant on offer, was not able to attract consumers for long amidst the rising competition in the SUV segment. The 22 units of CR-V sold by Honda in the month of April 2011 was worth peanuts as compared to 739 units sold by the segment leader, Toyota Fortuner.
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Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
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Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age WomanIIPM's Management Consulting Arm-Planman Consulting
IIPM Prof. Arindam Chaudhuri on Internet Hooliganism
Arindam Chaudhuri: We need Hazare's leadership
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
