Honda price reduction to make up for lack of diesel variants in Indian car market: June Quarter 2011 Analysis

Prior to debating Honda Motors price reduction announcement it’s important to analyze what has fuelled this move. A year on year comparison of sales figures for Honda Motors from March-June 2011 reveals no growth but rather a significant loss but does justify the Honda City price reduction announced in May 2011.

March 2010 saw Honda Siel Motors India sell 3,576 cars, down from 5,928 sold in March 2010, recording a decline rate of 40%. April 2011 saw Honda Siel Motors India sell 2,012 cars as compared to 3578 sold in April 2010 recording a decline rate 43%. In May 2011, Honda Siel Motors India sold 2,334 cars down from 4,067 units sold in May 2010, recording a decline rate 42.61%. In June 2011, Honda Siel Motors India sold 3,455 cars as compared to 4,595 units sold in June 2010, and recorded a decline rate of 25%. In February 2011, Honda Siel Motors India reported a decline rate of 22.83%.

It is easy to determine that a decline rate hovering above 40% consistently from March 2011 onwards forced Honda to rethink sales strategy. Offering a discount of Rs. 66,000 on their highest selling model, Honda City in India from May onwards ahs had result. Sales figures for the Honda City stand at 2773 units, 1542 units, 1828 units, and 2802 units for March 2011, April 2011, May 2011, and June 2011 respectively. The Honda City price reduction has helped increase sales volume, as well as, curb it’s increasing decline rate.

Price reductions for the Honda Jazz listed as follows. The Jazz base variant new price is Rs. 5.8 lakhs, as compared to Rs. 7.37 lakhs until recently. Honda Jazz Select variant costs Rs 5.91 lakhs as compared to an earlier pricing of Rs 7.48 lakhs. The Honda Jazz X new price is Rs 6.25 lakhs in comparison to a previous price of Rs 7.81 lakhs.

The drop in sales volume for Honda Motors India can be attributed to the unavailability of diesel run cars that are popular in the Indian car market. Continued petrol price hikes have severely dented sales of petrol car variants and Honda has suffered miserably. The decision to slash Honda Jazz prices could hold the company in good stead and record better sales volumes for July 2011 but how long the price reduction is sustainable is another matter.