Honda Motor Corporation (HMC) is considering consolidating its two entities, the passenger cars and motorcycles and scooter by merging its two automotive entities in India into one company. Though Honda Siel Cars India declined to comment on the issue, according to a report in Business Standard, HMC is considering such a merger of these two companies.
“Such a proposal (to merge two arms and increase consolidation) is discussed off and on. HMC indicated the general direction when it set up Honda Motor India (HMI), a new entity, some five or six years back to bring all parts procurement for HSCI and HMSI under one umbrella,” said Jnaneshwar Sen, Senior Vice-President (Marketing) at HSCI. Jnaneshwar Sen however also said that Honda Motor Company has a single entity elsewhere in the world and the idea to do the same in India is to “bring synergies of cost, branding and manpower management”. “When HMI was initially established there were lots of problems such as the inability of its management to understand the different requirements of two-wheeler dealers and car dealers. But, gradually, things have been sorted out. Now, if HMSI and HSCI were to merge, greater synergies could be explored”.
Honda Motors in India has a joint venture with the Siddharth Shriram Group, (called Honda Siel Cars India), which makes and sells cars like the City, Jazz, Brio and Civic and the manufacturer also has a wholly-owned arm, Honda Motorcycle & Scooter India (HMSI), which is the third largest two-wheeler company in India.
While HMSI has been quite successful and enterprising in the two-wheeler market by launching aggressive products in the market, their car business has not been able to make a big impact and reported a decline in sales after the tsunami in Japan, followed by floods in Thailand. The manufacturer has also suffered due to the lack of diesel engines but the company is expecting a double digit growth in 2012-13 over this fiscal year.
Honda entered the passenger car market in India in 1998 with the Honda City but the increase in competition and the lack of a diesel engine has greatly affected Honda’s sales. Sales have dropped despite Honda reducing the prices of the Jazz. Honda had introduced its first small car, Brio, in October of 2011 and though it has received a good response and reviews, sales have been poor because of the floods in Thailand.
Honda was earlier present in the two-wheeler market in India through a joint venture with the Munjals promoted Hero Group. In December 2010 however HMC announced the termination of its 26-year-old JV to go solo. HMSI recently has overtaken Chennai-based TVS Motor Company to become India’s third-largest two-wheeler manufacturer.
Honda->mot34] has also last month announced an investment of Rs1200 crore even as speculation increases that its co-promoter Shriram Industrial Enterprise (Siel) is likely to exit Honda Siel Cars. The money would be used to increase capacity which includes setting up of a manufacturing line at its plant in Rajasthan. There is also a possibility that diesel engines could be assembled in the future at this plant. We had last month also carried a report confirming that the manufacturer is developing a small diesel engine for its cars in India. “Honda R&D is currently developing a small diesel engine. However, we do not have anything specific to share right now,” said Jnaneswar Sen.