Cornered by competition from the likes of Hyundai Verna, Volkswagen Vento and Skoda Rapid and restricted by the lack of a diesel engine, Japanese car major Honda Siel Cars India on Wednesday launched a refreshed version of its best selling sedan, City, while cutting the entry level price by Rs 50,000 to Rs 6.99 lakh (ex showroom Delhi).
This is the second time in 6 months when Honda has had to slash prices of the City. In June, it had reduced its price by Rs 66,000 citing implementation of various cost reduction measures. With the new variant, Honda has plugged the price gap with rivals like Verna, Vento, SX4 and Rapid.
“Pressure from rivals is not as intense as from the pricing of diesel which has really skewed the market demand,” said Jnaneswar Sen, senior vice- president (sales and marketing), Honda. “The City remains the largest selling petrol car in its segment. We are also tied down by the production cuts due to the floods in Thailand.”
City’s sales in this fiscal has declined by 30%, even as Verna and Vento have grown by 119% and 334% respectively. Bulk of the growth in the other models is due to the rise in demand for diesel sedans on the back of a widening gap of petrol and diesel prices. City is the only model that does not offer a diesel option.
Honda has lost almost half its production due to component supply shortages from Japan after the Tsunami in March and Thailand. It is expected to resume full production by March 2011.
“There is a backlog of orders on the City of almost 1500 units, on the Jazz (4000 units) and Brio (7000 units) as we are not able to make enough cars,” said Sen.