Honda Siel Cars India plans to launch its compact car in the first quarter of 2009 and hopes to sell 40,000 units a year, according to component makers, who have been asked to submit bids for supplying parts. This would be Honda's first attempt to break into the segment which accounts for 70 per cent of the Indian market.
Honda is building a factory for 50,000-units a year in Rajasthan where it plans to make the compact car. The car is likely to compete against the Maruti Swift, Chevrolet U-VA and Hyundai Getz in the premium hatchback segment. The Swift sells around 61,000 units a year while the Getz sells 15,000 units.
While Honda has 1.3 litre and 1.5 litre engines that could be put in the small car, it is also reportedly working on a 1.2 litre engine to avail the tax breaks given in last year's budget, component makers say. Honda's compact car brands — a hatchback called the Jazz in Europe and Fit in Asia — are not available in India.
"Every manufacturer works on full and minor model changes, we can't comment on specifics," said NK Goila, vice-president at Honda.
The compact car will be preceded by the introduction of a new City sedan in 2008. The company expects to sell 60,000 units of the new vehicle a year, said the suppliers, who wished to remain unnamed. The City is the highest selling sedan in India at 40,000 cars a year.
Honda, which entered the Indian market in 1997, leads all the car segments in which it operates except the SUV segment. The company dominates the mid-sized, premium and executive segments with the City, Accord and the recently-launched Civic sedan.
In the last budget, the government cut excise tax by as much as 8 per cent for small cars, which it defined as vehicles that are less than 4 metres in length and an engine capacity not in excess of 1.2 litres in petrol and 1.5 litres in diesel. That cut led to a fall in the prices of models such as WagonR and Santro by as much as Rs 15,000. It also prompted General Motors and Hyundai to work on smaller engines for their Chevrolet U-VA and Getz vehicles to avail the tax break.
But in its 10-year blueprint for India's automotive industry released in January, the Government reduced the car size to 3.8 metres, potentially derailing the investment plans of these carmakers.
Email Ravi Krishnan: Ravi.K@livemint.com