VW-Suzuki partnership a worry: Honda

HONDA has revealed that rival tie-ups such as the recent Volkswagen-Suzuki union put immense pressure on it to compete on price while maintaining core brand characteristics and values.

The increased economies of scale, shared research and development costs and leveraging of specific marque strengths give the competition a significant price advantage, Honda admits, unless it can come up with smarter and more innovative solutions.

The problem is global for Honda, according to Asia-Pacific senior executive and Honda Motor India president and CEO, Takashi Nagai, speaking to GoAuto in Thailand this month.

“This is very worrying for us,” he said.

In Europe, the Toyota/Peugeot/Citroen threesome has spawned the highly successful Aygo/107/C1 triplets.

Europe, South America, China and the ASEAN region, with Australia, are the targets for the soon-to-be-released Nissan K13 Micra/March that leverages much from the company’s Renault/Samsung/Dacia alliance, while Hyundai and Kia together have become a global powerhouse.

From top: Honda's Takashi Nagai, Suzuki Alto and Hyundai i45.



“The Koreans are another big concern for Honda,” Mr Nagai said.

Even North America’s love of the Honda Accord is in jeopardy as Hyundai’s i45/ takes the US by storm, and it is about to be joined by its Kia Magentis/Optima fraternal twin.

Similarly, the Hyundai Tucson/ix35 and Kia SL Sportage duo are bad news for the Honda CR-V. Honda also has to compete with all these models in Australia.

But it is the VW/Suzuki union – announced last December and involving the German car-maker taking a 19.9 per cent stake in the Japanese company – and its potential in the emerging ASEAN markets, that Honda believes will grow the most over the next decade.

Mr Nagai says Suzuki’s long-time Indian partner, Maruti, has 30 years of experience in the bottom end of the new-car market in India, while the German conglomerate has form in quality design, engineering, safety and massive economies of scale.

The combination, he added, could become a nightmare scenario for the competition, luring younger and/or first time buyers into the VW and Suzuki fold for life.

Nevertheless, he said he believed Honda could still move forward alone because it had become open to new and smarter ways of bringing a car to market without sacrificing the fundamental characteristics of the marque.

Honda will launch the production version of the sub-Jazz light ‘New Small Concept’ sub-B hatchback next year, and hopes it will make its own huge splash in the ASEAN region.

A Honda insider said the New Small Concept name was chosen for its 2010 Delhi motor show debut in January because it hinted at the story behind the car as much as what the model actually is.

Mr Nagai revealed that Honda had no plans for the time being to court another car-maker to save on development, building and marketing costs.

“We have no plans to partner with anybody else,” he said.

Asked if Honda has considered inventing a new ‘cheap’ sub brand so it could protect the brand while offering models that are not quite as well engineered as Hondas have been in the past, Mr Nagai suggested that it would be a “pointless” exercise and a waste of resources since the ‘Honda’ reputation is its greatest asset and his rivals’ greatest enemy.

“People buy a Honda because it is a Honda,” he said.