Honda to focus on Tier 3 cities

Honda is on expansion mode. A new plant apart, the carmaker has plans to expand its dealer footprint in India. At present, Honda has a presence in 102 cities with 163 dealerships. Plans are afoot to increase this number to 230 dealerships in 150 cities by March 2015. Interestingly, all of the new dealerships will come up in tier 3 cities that currently account for 50 percent of Honda’s dealer network. There’s a strong case for such expansion too. Tier 2 and Tier 3 cities make up as much as 65 percent of sales of the Amaze, while Honda expects 58 percent of City sales to come from these cities.

 

In the short term, however, Honda’s challenge is to normalize production of the new City and reduce waiting periods. The staggered launch programme for the City which saw the diesel version go into production first, seems to have backfired for Honda. Many buyers, for quick delivery of their cars, opted for the diesel making it the more preferred car. Nearly 70 percent of initial City bookings were for the diesel car. However, Honda believes that as production stabilises, the gap between petrol and diesel City demand will reduce significantly.