The Puzzle of Honda’s ‘Oh No!’ Year

Why did Honda’s car sales slide last year? Was it misfortune? Or did rivals get the better of it? Judge from its market moves

Japanese car makers are famous for their Ohno Circles, an exotic way to enforce quality, but Honda Siel Cars India Ltd seems to have spent 2011 suffering a series of ‘Oh no!’ moments. As if in confirmation of an awful year—with only two cars sold for every three in 2010—HSCIL’s CEO Takashi Nagai and Marketing Chief Seki Inaba have both been yanked out of their jobs in India. Is the company in crisis?

“Oh no,” says a quasi-insider, “it was in crisis.” There is no reason, he adds, not to believe Jnaneswar Sen, senior vice-president, sales & marketing, when he ascribes Honda’s droopy sales chart to a couple of calamities last year. Its assembly lines were disrupted first by the tsunami in Japan and then by floods in Thailand, events that deprived them of crucial car parts. And now, with the launch of its small hatchback Honda Brio, life will resume as before—with cars selling as fast as they’re cranked out.

Some market watchers, however, are sceptical of that explanation. The car maker’s slowdown, they say, came soon after its bestseller Honda City was assailed by rivals in the form of Hyundai Verna, Volkswagen Vento and Toyota Etios. And didn’t the City’s price cuts last year betray desperation? For a car portrayed as its own (earlier model’s) competition, was that not odd? According to HSCIL, price cuts were always part of City’s plan and not in response to competitive pressure. This makes it no easier to puzzle out the truth.

For clues, let’s examine its market strategy as seen in its advertising. At first, in late 2008, it whizzed its way ahead exactly as aimed, slung forth by its ‘Enjoy your challenges’ ad campaign, The Race, which waxed poetic about self-motivation (and/or self-transcendence). In no time, aided by its sleek ‘arrowshot’ looks, it was selling some 5,000 units every month. Once sales slackened, around mid-2011, it offered itself as a value-for-money purchase. But while its new ‘look into its eyes’ ad campaign, Someday, did convey the car’s accessibility, it seemed equally keen on selling itself as a hypnotic charm. And then, early this year, it switched campaigns again. It now sells itself as an ‘exceptional’ car. Monthly sales, which had fallen drastically last summer, have shown a sharp revival of late. And HSCIL’s supply-crunch story suddenly sounds like a plausible explanation. As 2012’s numbers roll in, it can afford to look self-satisfied on at least one count. Come tsunami or high water, it knows a thing or two about its market: sell ‘em value, but be subtle.

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Aresh Shirali