Honda Siel Cars India Ltd is pulling out all stops to ensure that its next offering, the Jazz, will not be hit by the present raw material cost spiral.
The car is scheduled to roll out of the new plant in Rajasthan next year.
President and CEO, Masahiro Takedagawa told DNA Money that the steep increase in raw material prices was a huge challenge that the company and suppliers were trying hard to cope with.
However, the idea is to work on keeping them in check for the Jazz which could put huge pressure on component suppliers as a result.
"We are working with our vendors, not in order to squeeze them but to reduce costs. They are part of the Honda family and we need to grow and enjoy the benefits together. We do not ask for discounts from them as a policy," he said.
The Jazz will be Honda's first small car offering which means that it will conform to the specifications of being under four metres long with optimal engine capacities of 1.2 litres and 1.5 litres apiece for the petrol and diesel versions.
Ideally, it will have to be priced at under Rs 5 lakh (on road) for a basic petrol option at a time when raw material prices have shot by nearly 40% over the last few months.
Indications are that the company will position it in the Rs 5.5 lakh plus range to retain the premium image it has been focusing on for all its products.
Interestingly, the car succeeding the Jazz will be smaller with a one-litre engine and priced a little around Rs 4 lakh.
Quite unlike the Noida plant which manufactures the City and Accord, the Rajasthan facility is tipped to be a full-fledged manufacturing facility with an engine assembly line that will see grater local sourcing of body panels and other critical parts.
Costs could be a lot lower consequently as imports will be minimal.
On the current inflationary trends in prices of steel and other inputs, Takedagawa said this was being faced by all manufacturers in India and Honda was no exception.
"Our objective is to minimise the impact to our customers. The way out is to share the burden with our business partners starting from our logistics company, suppliers, dealerships, ourselves and finally the buyer."
According to him, Honda has been trying its best to supply affordable parts on its own though this has not been easy.
"We are now trying to improve our costing structure with our partners. High costs are a reality which we have to accept and the impact is enormous for global manufacturing as a whole," he said.
Interestingly, Honda was exploring the option of manufacturing the CR-V which is being imported from Japan. However, that has since been put on hold.
"The vehicle was only launched 18 months ago and its lifecycle is still not complete. It is not wise for us at this point to change production resources halfway even though the SUV market has tremendous potential in India," Takedagawa said.
On Wednesday, the company launched the Civic Hybrid with a price tag of nearly Rs 22 lakh, half of which is a result of the 100% plus import duty.
"Our objective is not volumes but to offer customers the latest Honda technology," he said. Nearly 100 enquiries are already in place and estimates are that sales of the Civic Hybrid could be in the region of 1200 units annually.
Under license from www.3dsyndication.com