Honda: A fresh view from the driving seat

Honda’s new managing director in India, Katsushi Inoue, who took over in April, talks to Fortune India about his mandate for the country, focussing on the hatchback segment, and brand positioning. Edited excerpts:

What was Tokyo’s brief to you before you got here?
Everyone is watching India closely. It’s a complex but attractive market. I was asked to go ahead and hit the accelerator.

How are you reading India’s small-car market?
The hatchback segment is the volume churner. While segments A [Alto, Eon] and B [i10, Indica, WagonR, Spark] have de-grown by 7% and 10%, respectively [in FY15], the B+ segment [Swift, Brio, i20, Polo] has grown by 10%. The B+ premium segment [Elite i20, VW Polo, Jazz] also has grown by 42%. This indicates an aspiration for bigger and better cars.

Compared with other Indian carmakers, how close has Honda moved towards achieving the full cost advantage of using locally manufactured parts?
The average percentage of local content in our cars is 92%. Our costs will be in line with local players when that reaches 100%. How fast we get there will depend on being able to adeptly forecast foreign exchange movement and other dynamics.

There’s a vacuum in the premium sedan space, where the Civic used to be. Honda phased it out here even though it sells well in other markets. Do you have any plan to refill that vacuum?
That segment has shrunk so much that we feel sticking to the City makes better business sense. If the market changes and demand reappears, we will be happy to reintroduce the Civic.

Honda’s strategy was to position its cars as far more premium—the Accord, the Civic, and the hybrid Civic, all of which have been phased out. So, are you going mass consciously?
There is no clear definition of premium around the world. Some would say it’s Mercedes-Benz, but it’s expensive. Premium has nothing to do with price; it’s about an image associated with quality. That’s why I want to improve Honda’s operational quality, our production capabilities, and make the business more efficient.

You have 252 dealers in 152 cities. Are you satisfied with the network’s density?
We will have 300 dealers in 200 cities by the end of this fiscal. It’s good, but we have to add more.