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Angelica Cabajar

Mktg Mgt. 3-A

Honda rejigs pricing


strategy

Honda, over the past


month, has made some surprising moves. The brand, which
otherwise commands a premium, sharply reduced the prices
of its bestselling City and the premium hatchback Jazz. On
June 14, the carmaker announced new prices for the City,
slashing the price tag by Rs 44,000 for the top-end version

to Rs 66,000 on the entry level one.

The growing sales of new rivals like the VW Vento and


Hyundais new Verna have clearly driven this
uncharacteristic move on Hondas part. But the Japanese
carmaker says that the price revision is due to the increased
localisation level in the City. According to Jnaneswar Sen,
senior vice-president Sales and Marketing, Honda Siel
Cars India, Our R&D function in India started working on
localisation and cost down activities for our volume models
from 2009. In anticipation of bigger volumes resulting in
economies of scale from the second half of the current year,
we have achieved considerable cost reduction and are
happy to pass on the benefit to the customers with
immediate effect." An industry source said that with the
development of a local vendor base for the Brio, Honda has
managed to increase local content for the City too.
Hondas decision to revise the Citys prices comes within
months of the car losing the top slot in the segment to
Volkswagens Vento. The German competitor, thanks to the
option of a diesel variant, sold 15,098 units as against

14,870 units of the City during the January to May period.


The absence of a diesel variant and the reduction in
production level due to the earthquake in Japan has also hit
Honda hard.
The Jazz, which has been a slow starter so far, is also a
beneficiary from Hondas latest retail strategy. Honda sold
sold 1,413 units during January to May, as against 1,837
units during the same period last year. The Jazzs price has
been cut by around Rs 150,000 under a limited period offer.
Unlike the City, this is not a new price but a sales scheme.
Dealers say the strategy has worked well. Almost all the
cars we had with us have been sold off, thanks to the offer,
says a Mumbai-based dealer.
With these unprecedented price cuts by Honda, could there
be an adverse impact in the Japanese majors brand
equity? Perhaps not, says a leading brand consultant.
The brand equity remains intact if the price cut is to counter
a strong competitor and without any compromise on quality.
Well, with Volkswagen and Hyundai as competitors,
Hondas price-cutting move may not dilute its brand equity.

Instead, it has definitely brought in more customers to its


showrooms.

REFERENCE :
http://www.autocarindia.com/auto-news/honda-rejigspricing-strategy-270604.aspx