Contrary to what most manufacturers are doing these days, Honda says it will plan products for the emerging markets in Asia alone.
Industry tie-ups to produce more and cheaper cars for the growing markets in Asia have become extremely commonplace. Volkswagen recently signed a deal with Suzuki (whose Indian unit Maruti Suzuki manufactures the best-selling car in India); Daimler and Renault-Nissan are looking at cooperating; and General Motors also has several cooperative agreements in China. Honda however, says it will avoid any such tie-up due to its past experiences with Rover and GM.
“Pursuing bigger volumes is certainly one way of lowering costs,” Fumihiko Ike, head of Honda’s Asia and Oceania operations, told Reuters. “But in reality making cars isn’t that simple. It’s very difficult for two companies to work together towards a common goal. On paper you might end up with the volumes, but in other ways you get huge inefficiencies.”
Ike said that working speedily to develop the products and technologies for developing Asian markets is expensive, but could be more beneficial than working with a partner. He said it allows the automaker to work with parts suppliers to lower costs rather than with another automaker. He also added that if a company or partnership got too big, its efficiency would also fall.
One distinct advantage to a partnership is the ability to spread the development costs of small vehicles with low-profit margins, which are common in India. Mini-cars make up more than two-thirds of all car sales in India.
Honda currently ranks fourth in sales in India, with 348,000 sales last year. Hyundai is the best-seller with 1.37 million units, followed by Toyota and Suzuki with about 1 million vehicles each. Honda is currently developing a small car to slot in below the current Fit/Jazz, which will be priced around $11,000, putting it at the high end of the small car market. With a new small car on the way and the Indian automotive market expanding rapidly, Honda aims to increase its foothold in the market.