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Honda Cars developing its smallest diesel engine to take on Maruti, Hyundai

Sharmistha Mukherjee/New York 14 Apr 13 | 01:15 PM

Japanese auto major Honda Motor Company (HMC), which launched its first major offensive in Indian market with the launch of diesel-powered entry-level sedan Amaze last week, is looking at developing a diesel engine with reduced capacity to power small cars in emerging markets.

The diesel engine with displacement between 1 and 1.2 litre once developed would be the smallest for the car maker globally.

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Atsushi Arisaka, chief engineer, large project development, Honda R&D Asia Pacific said, “We are looking at developing a smaller diesel engine. We are looking at a diesel engine with engine capacity between 1-1.2 litre. Once developed, it can be used on small cars." While Arisaka declined to specify a timeline for the launch, company sources informed it usually takes 2-3 years from the commencement of a project to come out with the final product.

Honda’s move is strategic as it aims at doubling sales in emerging markets including India and China to three million units by 2017.

While Honda has recently introduced the 1.5 litre i-DTEC (exclusively developed for the Indian market) engine, it has no plans to strap it on existing products including the Brio. The 1.5 litre engine would be sequentially adopted on to newer products including the new City, the Fit (Jazz) and utility vehicles, the smaller diesel engine can be used to power entry-level cars, say industry experts.

Honda’s initiative could throw a major challenge to heavyweights such as Maruti Suzuki and Hyundai Motor who have maintained a stranglehold in the small car market in India for over a decade. At present, Maruti Suzuki with over half a dozen models ranging from M800 to Maruti Suzuki Swift commands 48% share in the compact car category. Korean auto major Hyundai has a market share of 22%. While Maruti Suzuki sources its 1.3 litre diesel engine from Fiat, Hyundai’s i20 is powered by a 1.4 litre diesel engine. Both companies are reportedly working on bringing small diesel cars in the Indian market, where 58% of new car sales happen in diesel.

A smaller diesel engine would give Honda (market share of 2.9% in the small car category) a strong advantage in boosting volumes in the dominant compact car segment, which accounts for over 60% of passenger vehicles sales. Hironori Kanayama, president and chief executive officer, Honda Cars India, has additionally hinted the car maker is exploring possibilities to launch a model below the Brio compact.

“With economic development, there is an increased consumer preference for more expensive cars which has resulted in a demand boom for utility vehicles. But that is not the only case in India. There are a large number of people who want to own cars and because of such first-time buyers the compact car segment would continue to generate demand. While a final decision has not been taken we are studying the market below Brio", Kanayama informed.

To oversee the rapid ramp-up of India operations the Japanese auto major has also changed its global organization structure. HMC has appointed Yoshiyuki Matsumoto, managing officer, HMC as ‘Representative of Development, Purchasing and Production in Asia & Oceania Region’ who will be based out of India. In his new role, Matsumoto will oversee operations at 25 companies and 11 R&D centres in the region. He will also head all Honda Group companies in India.

Honda Cars India, which till recently had an all petrol line-up in the country, has seen market share dip over the decade due to increased competition from global players. Sales of the company had dipped 8.47% in FY12 at 54,427 units, but improved substantially last fiscal to 73,483 units post the launch of the Brio hatchback, its first truly volume model.

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