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15 June, 2011 Honda has cut the price of its City sedan by up to 66,000 to regain its market leadership after competitors such as Volkswagen Vento and Maruti Suzuki SX4 raced past it in recent months.
Honda Siel Cars on Tuesday brought down the price of the base EMT variant of City to Rs 7.49 lakh (ex showroom Delhi) from Rs 8.15 lakh, while the top variant VAT Exclusive is now Rs 44,000 cheaper at Rs 9,89,100.
The company attributed the price cut to successful implementation of various cost-reduction measures as a result of an initiative started two years ago. “It all began with market feedback that the prices have gone very high,” said a senior Honda official.
Honda’s R&D team, comprising 40 Japanese engineers and 20 Indian engineers, started working on a project to achieve economies of scale in 2009 in anticipation of the launch of its entry-level hatchback Brio. With Brio set for launch during the Diwali season, Honda has combined production of common things like components, leading to economies of scale.
Honda Siel Cars Senior Vice President (Sales and Marketing) Jnaneshwar Sen said, “In anticipation of bigger volumes resulting in economies of scale from the second half of current year, we have achieved considerable cost reduction and have passed on the benefit to customers.”
The City range, which forms over 70 per cent of Honda Siel’s sales, has been sliding in sales in the last three months as customers started preferring diesel rivals such as Volkswagen Vento, Maruti Suzuki SX4 and the recently relaunched Hyundai Verna.
City lost its segment leadership position to Volkswagen Vento in March this year and now trails both Vento and SX4. The new Hyundai Verna, priced much lower than the City, too has been drawing huge customer interest.
While Verna, SX4 and Vento offer both diesel and petrol options, City comes only in petrol variant. This is not helping in a market increasingly preferring diesel models mostly due to frequent rise in petrol prices.
With customers now veering towards diesel cars due to rising petrol prices, Honda has started campaigns focusing on its fuel efficiency. “City is known for fuel-efficiency. We are harping on this fact,” an official said.
Honda does not have any diesel engine, but it’s developing the technology to have such engines in smaller sizes of 1500cc to be fitted in City, Jazz and its other models.
The price cut in City models has sharply reduced its price gap with Honda’s struggling hatchback Jazz. In fact, the entry level City model is now cheaper than the top variant of Jazz. This may drive down sales of Jazz from existing 500 vehicles a month. 
