Honda working on 1-litre petrol engine; looks to take on Maruti, Hyundai with new small car

After doubling its market share to about 7% in just two years, on the back of diesel models of Amaze and City, Honda is now gearing up for the second leg of its mass market strategy to challenge the supremacy of Maruti Suzuki and Hyundai. The carmaker is developing a 1-litre petrol engine, the smallest in its car range globally, which, it hopes, will help it gain a foothold in the small car segment, which includes the country's top-selling models — Maruti Alto, WagonR, Celerio and Hyundai Eon.

Sources told FE that the new 1-litre petrol engine, which will be available in both turbocharged (higher power version) and normally aspirated form, will likely be first used on a new small car expected to be launched in 2017, below Honda's current entry model Brio. For this high-volume model, Honda is planning a third domestic car plant in Gujarat, as first reported by FE in October last year.

“Honda will look to set new records in petrol engine fuel efficiency. The development work for the new 1-litre petrol engine is going on in Japan. The engine will be fitted in its mini/small car range, while the highly fuel-efficient turbocharged versions could go into bigger cars like the Jazz or even City,” a source said.

Asked for details over email, a Honda Cars India spokesperson said, “We cannot comment on future product development. Currently, we do not have any plans to introduce any smaller car than Brio. The 1.2-litre i-VTEC petrol engine continues to be the smallest petrol engine among our global cars portfolio.” This 1.2-litre petrol engine powers the Brio and Amaze.

In July, Honda emerged as the third-largest carmaker with volumes rising 39% to 15,643 units in the month and 40% in the April-July FY15 period to 56,361 units. The company displaced home-grown Mahindra, which saw a

5% drop in monthly sales to 14,708 units.

Honda's market share has more than doubled from below 3% in FY13 to 7% (April-July FY15), while market leader Maruti Suzuki and Hyundai command about 44% and 16.5% market share, respectively. Honda's domestic volumes in FY14 rose 83% on a low base to 1.34 lakh units while the overall passenger vehicle market fell 6% to 25 lakh units.

Honda's success has largely come on the back of a shift in focus to the mass market from the premium segments with models like the Accord, Civic and CR-V. The shift started with the Brio in September 2011, but really gained strength after the Amaze — its first diesel model in India with an all-new 1.5 litre i-DTEC engine. The Amaze was launched in April 2013. Thereafter, the company launched the new City in January this year and the Mobilio MPV

last month, both of which also sport the same diesel engine. The City and the Amaze,p>have been strong successes with monthly volumes of over 7,000 units.

"We actually have a capacity constraint and are currently making as much cars as we can. We will have to soon see when to start the second shift at the new Tapukara plant,” Jnaneswar Sen, senior VP for marketing & sales had previously told FE. Honda currently operates two plants at Greater Noida and Tapukara (Rajasthan) with a combined output of 1.4 lakh units a year.

Volumes are likely to only grow from here with the launch of the new Jazz early next year that will be Honda's first diesel hatchback in the market, followed by a compact SUV on the Brio/Jazz platform, a new small car below the Brio, a diesel variant of the CR-V and the new Accord.