Rising fuel price is the biggest concern: Honda Cars India's Gaku Nakanishi

'I come from Japan and there, too, the consumers are sensitive to fuel prices though the per capita income is 20 times higher there,' says Nakanishi

Japanese auto giant Honda has slipped one spot to fifth in the domestic car market recently, though it tasted success with the new Amaze. Gaku Nakanishi, president and chief executive officer at Honda Cars India, tells Ajay Modi that market share is critical but it does not want to compromise with product quality. He talks about pressing concerns like the weak rupee, high fuel prices, and the lacklustre demand in July-September quarter. Edited excerpts:

The car industry is seeing concerns over rising fuel prices and higher EMIs. Are these affecting the sentiments among buyers?

Yes. A car is the second-biggest purchase decision for an individual after house. Since it is a major decision, customers are careful about the driving cost and the ability to keep paying the EMIs. Of course, it is affecting sentiments. 

The first half of FY19 has ended. How does the year look compared to last year when concerns like the weaker rupee, raw material pressure, and high fuel prices were not there? 

In the first quarter of this year, the industry grew by high double-digit but declined in the second quarter. If this trend continues, the industry will suffer. We are waiting to see how this month goes. If it recovers, the forecast can still be positive. But if it declines this month as well I have a concern. This month is very important for everyone.

Which is the biggest concern for you right now?

I think the fuel price is the biggest concern. I come from Japan and there, too, the consumers are sensitive to fuel prices though the per capita income is 20 times higher there. However, petrol price in Japan is just Rs 90 a litre and it is not significantly lower in India in spite of the wide difference in per capita income.

How does Honda plan to introduce new technologies in India? What are the challenges? 

We are now preparing our electrification strategy, which will not just have electric vehicles but also hybrids, including plug in hybrids. Though electric vehicle is the most efficient, one from the regulation point of view, its cost is quite high. We need to have best mix of petrol, diesel, and electric/hybrid vehicles that will be best for the society. We will start with hybrid in three years. We are studying what strategy is best for consumers and the country. 

The Indian government has a much higher tax on hybrid compared to electric vehicles. Is that a concern?

I have worked in Thailand where the government offers major benefit on hybrid and it makes it easier to launch product. In India, there is no incentive and hybrid costs a lot. We need to work harder to reduce the cost and also need a dialogue with the government.

Dealerships are sitting on inventory and cars are not moving out at a desirable pace. Is there a financial hardship? 

The interest rate is increasing and banks have started to squeeze with a much stricter investigation before lending. Some dealers, not only in Honda, are in a very tight situation. In order to support and motivate them, we are trying to bring dealer incentives. 

Do you continue to expand the marketing network?

We are present in tier-I, -II, and -III cities in India. We have covered tier-I cities and tier-II is almost done. However, the fastest-growing market today is the tier-III cities. We have found many potential markets that we want to cover. We will put new showrooms to cover the gap.

Honda lost fourth position in the Indian car market to Tata Motors. Is market share and rank critical? 

Of course, it is important. I am a sales-oriented guy. The market share is very important and a key indicator. But to sell more I cannot ignore quality. Our philosophy is to meet customers’ expectations and the focus is to deliver a durable, reliable, and quality product. The Indian customer appreciates Honda. We want to maintain this distinctiveness.