Facing the heat from competitors and feeling the pinch of not having a diesel variant, Japanese car major Honda on Tuesday took an unprecedented step, slashing the prices of its best selling sedan "City" by Rs 44,000-66,000, bringing the sticker price of the car to under Rs 7.49 lakh.
The City remains the most expensive petrol car in its segment, but with Tuesday's move, Honda has narrowed that difference, which has helped its competition considerably. After the City, the most expensive car in the segment is the Volkswagen Vento at a little over Rs 7 lakh, followed by Maruti's SX4 at Rs 7 lakh and the new Hyundai Verna Fluidic at Rs 6.99 lakh.
"In anticipation of bigger volumes resulting in economies of scale from the second half of current year, we have achieved considerable cost reduction and are happy to pass on the benefit to the customers with immediate effect," said Jnaneswar Sen, senior vice-president, sales and marketing, Honda Siel Cars India.Honda said its efforts in enforcing cost reduction efforts in the supply chain and manufacturing enabled it to bring down the price of mass market high volume models like the City. Honda's other cars like its small car Jazz and the bigger Civic are unlikely to get a similar price cut due to their lower volumes, but the company said it is now in a better position to price its next small car Brio aggressively.
Even with this price reduction though, the City may not be able to thwart competition entirely as the lack of a diesel option is where others are scoring the most.
It is now the only car in its segment available only in a petrol engine at a time when higher cost of the fuel has made diesel a very attractive option. Diesel accounts for nearly 60% of the sales of every other car in the segment.