Honda Seeks to Boost Auto Sales in India

Honda Motor Co. President Takeo Fukui unveiled a new version of the City, Honda's best-selling compact sedan in India, aiming to boost sales in this key emerging market as concern grows of a global slowdown in the auto industry.

With sales in the U.S., the world's largest market, falling to their lowest levels in years, auto makers have looked to hot markets like India and China to help pick up the slack.

But now these other auto markets are also showing signs of weakness. In India, auto sales fell in August from a year earlier, marking the second monthly fall in a row. August sales in China also fell from a year earlier, marking the first decline in auto sales there in two years.

"Even in India, they are not immune to the cyclical nature of the economy," says Tatsuo Yoshida, an analyst for UBS Securities in Tokyo. "Investors have been very nervous about near-term prospects of the Indian automobile market."

The Honda president said he thinks India's slowdown is temporary. "It's sure to bounce back in the next few months," Mr. Fukui said.

Meant to draw buyers back into dealer showrooms during the coming festival months in India, Honda's new City model is part of a wave of vehicle launches by car makers into the country's increasingly crowded auto market.

In 2007, the current City model was Honda's biggest seller, accounting for 37,000 of its total sales of 60,000 vehicles. In the first eight months of this year, sales of the current City were up 12% from a year earlier. The Japanese auto maker is expecting the new model to help lift Honda's India sales above those of last year. Honda's goal for 2008 is to sell 80,000 vehicles in India, though it may not reach that because of the slowdown.

Mr. Fukui, who describes the City as "roomy," said it is Honda's "most significant model" in the Indian market. Though it would be considered a compact, entry-level vehicle in developed markets, the City is viewed as a premium vehicle by business executives here. The new model will cost about 800,000 rupees, or close to $17,500, making it Honda's least expensive vehicle in the Indian market but still beyond the reach of most car buyers.

Although Honda dominates the motorcycle market in India, the Japanese company doesn't offer any models in India's small-auto segment, which makes up the vast majority of car sales.

The new City was also launched this month in Thailand, one of 39 countries where the model has been sold since the first-generation City was launched in 1996.