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Honda Cars India profit doubles on one-time tax gain

Honda's market share had fallen to a mere 2% in 2011-12 due to lack of diesel cars in the portfolio

By Pritish Raj

Honda Cars India, the maker of popular sedans City and Civic, has reported an over two-fold jump in profit at Rs 1,141 crore for fiscal 2018-19 on the back of one-time reversal of tax gains to the tune of Rs 860 crore.

While the passenger vehicle (PV) industry grew at its slowest pace in five years in FY19 at 2.7%, Honda's volumes grew 8% at 1.83 lakh units owing to better products mix and higher promotional offers. Revenues during the period under review remained almost flat at Rs 16,412 crore as volume growth remained consistent for the past two years.

PV sales started declining since July last year on account of rise in prices and costlier finance options.

Thereafter mandatory safety features installed by manufacturers also led to a rise in prices, impacting sales for over a year since July 2018.

However, Honda's volumes continued to grow during most months of FY19 on the back of new product launches and upgrades, better capacity utilisation and higher discounts given to combat the slowdown in demand.

While Maruti Suzuki's volumes grew by 5.25%, Hyundai's sales rose by just 1.68% in FY19.

The local car manufacturing arm of the Japanese manufacturer had bounced back to profit at Rs 489.63 crore in FY18 after posting losses in FY17. After posting losses for six consecutive years, the company had made profits of about Rs 360 crore in 2014-15 as it forayed into the diesel segment and sales picked following its second manufacturing plant going operational.

Honda's market share had fallen to a mere 2% in 2011-12 due to lack of diesel cars in the portfolio. Following the introduction of diesel variants and new product launches including compact sedan Amaze, the company's market share touched a high of 7.3% in the domestic market in 2014-15.

The share thereafter fell to around 5% in FY19 due to stiff competition in the utility vehicle segment by players like Maruti Suzuki and Hyundai Motor India. The company makes models like BR-V, CR-V, WR-V and Civic.

Earlier this year, Honda announced it will exit the hatchback segment in India due to falling demand.

It has already stopped selling its entry-level hatchback, Brio.