Honda and all that Jazz

One Life. Get Serious.

Today, I’m going to get back to my first love, my passion : cars ! Its been a while since I used to eat, drink, breathe, sleep, think only cars. I’m itching to write on a subject so close to my heart.

These are the times for the ‘Superhatch’ in India. The market for cars in India has been skewed towards hatchbacks unlike that in China, where sedans rule the roost. This is entirely because of the price sensitivity of the Indian consumer. I would modify that to ‘value seeking’ mindset of my fellow countrymen, a hard-to-break habit formed over hundreds of years of living frugally. Many a multi-national car maker has erred on the wrong side of pricing, assuming people will pay a little extra for the bells and whistles, and paid the price subsequently for it. The importance of price cannot be overemphasized in the Indian context.

I remember that when the price of the first truly ‘all-Indian’ car, the Tata Indica, was announced on December 30, 1998, Maruti Suzuki proclaimed a price cut for their hot-seller 800 model. This was unprecedented in the history of Indian Automobile industry, in which ever increasing prices were the norm. Hats off to Tatas for redefining value for the Indian car buyer, and kudos to Maruti Suzuki for being so prompt in responding despite being in a near-monopolistic situation. Tata Motors launced a slew of models thereafter, all game-changers because of their ‘value for money’ pricing.

I did not see the other multi-nationals playing the low-price/high volume game till much later. They were betting on the premise that as the Indian consumer moved up in terms of personal disposable income, he will upgrade to bigger, more expensive cars. They faltered miserably when the car buyer did not oblige despite a fatter income, and many a models languished at miniscule, unprofitable volumes. What went wrong ? Why was the Indian car market not behaving like other mature markets behaved during their growth path ? Because – this happens only in India, we are like this only ! The psyche of the Indian buyer is the classical middle-class – that of a value maximizer. No matter how much the income may grow, we Indians are rupee stretchers by habit, and would squeeze the last drop of juice from a lemon or the last ooze of toothpaste from a tube.

So, while the Indian car buyer did want to upgrade as his prosperity grew, he was not willing to pay any price for it. For him, the value-seeking missile inside his head kept him honed on to bargain propositions.

Back to the ‘Superhatch’ theme of this post. Since the launch of the Skoda Fabia last year, there has been great interest by both manufacturers and buyers in this relatively unexploited segment. When the Rs. 3-4 lakh hatchbacks held sway over the car market, it was difficult to imagine someone buying a hatchback for upwards of Rs. 6 lakhs.

This year has seen a flurry of premium hatchback launches. First came the Hyundai i20 (launched in November 2008), followed by Fiat Punto and then the much awaited Honda Jazz. I presume the Jazz is very important to Honda’s strategy in India, and being the first hatchback from its stable, is ostensibly aimed at driving up the overall sales volumes substantially.

But, alas, Honda committed an oft-repeated blunder of over-pricing the model. While some may argue that it is too early to pass a judgment, I say the verdict is already out and there for everyone to see. In the two months since its launch, Jazz has managed to notch up only about a 1,000 units a month. This is a fraction of its top-selling sedan, the Honda City. Compare this to the July sales of Hyundai’s i20 of more than 3,300 units. Fiat Punto has also done a commendable monthly sales of about 1,700 units in June and July. Only Skoda Fabia is languishing behind at 300-400 nos. a month.

The reason for this damp squib sales of the Jazz is not difficult to see : the price band of Rs. 6.98-7.33 lakhs (ex-showroom Delhi) is a tad too high for the wily Indians to see value. No doubt, Honda will always command a premium over other brands, but not any premium. While the i20 has a price of Rs. 7.72 lakhs at the top end, there are many options available starting from Rs. 4.8 lakhs to Rs. 6.8 lakhs. I strongly suspect Honda took the price of the top end model of i20 as the benchmark against which to peg the Jazz price. A costly mistake to my mind. It has only helped to spur the sales of i20.

In terms of specifications and features, the i20 is a close match to Jazz, and I personally like the styling of i20 unlike other Hyundai models. And this is exactly where the customer has seen through the value and chosen i20 over Jazz. Fabia is priced between Rs. 6.09 – 7.14 lakhs, and the reasons for its low volume are bulky looks, low power and a TDI diesel engine (god, this is ancient, why can’t they have plugged a Crdi ?). The Punto scores on distinctive styling, petrol and diesel options and fabulous pricing – starting from Rs. 3.99 lakhs right upto 6.11 lakhs. Full points to Tata-Fiat once again for delivering maximum value to the discerning Indian car buyer.

If Honda was serious to become a volume player in the great Indian Car Circus, and shake the market to catapult into a leadership position in the ‘Superhatch’ category, it should have priced the Jazz at least Rs. 50,000 cheaper. A more aggressive, full-on strategy would have been to price is lower by Rs. 1 lakh and start at a sub-6 lakh, psychologically enticing price point. It would have taken the wind out of the sails of i20 and Punto, and mauled the Fabia.

How many lessons would it take for the car manufacturers to learn that pricing in India is a matter of both strategy and finesse ? A good product with competitive features are a given – you can’t succeed with a screwed up product, no matter how low the price. So, I think the most serious thought needs to be given to the price of the model before it is launched in the market, more than any other aspect. It’s a make or break decision.

The next action in the Superhatch category will come from Volkswagen’s Polo, which is slated for a early 2010 launch and rumored to be priced starting at Rs. 4.5 lakhs. I really doubt the pricing, but if true, that should make the elephants dance !

One last para on the Superhatch – I really like the safety features in these minis. With dual front, side and curtain airbags and ABS with ABD, these are great protectors in times of an unfortunate incident. It is alarming that India has the highest road mortality rates in the world, and is yet we are so insensitive to human lives as to give passenger safety a low priority. The safety features in cars are long overdue, and the Superhatches have brought about a change in the right direction.

Endpiece : “Your best teacher is your last mistake” – Ralph Nader

India and its Great Domestic Potion (GDP)

Can India save the world ?

Now that I am over and done with my own personal “change management”, I can devote attention to some larger issues.

The suddenness and severity of the global meltdown has had a very deep financial and psychological impact everywhere in the world. With every TV channel, newspaper, magazine, radio, internet, coffee-break shop talk and perhaps even kitty party chatter hovering on the topic of state of economy, I dwell on this theme a little today. The post-mortem and dissection of what, why and how the global recession happened will be written about for a long time to come, in reams and reams of analysis by experts. I will only try to make some sense of ‘economy’ from a layman’s perspective.

Let me start with the most commonly used measurement of economy – the GDP. What exactly is this ‘be all, end all’ of today’s human existence? Without getting into the technical definition of GDP, it simply gives an indication of a nation’s performance in terms of its goods and services produced in a particular year. Economists make a great song and dance about this one statistic more than any other for a nation’s economic health, and very rightly so.

When the downturn struck somewhere in the middle of last year, much of the human race watched in horror as GDPs of every nation plunged into negative territory or took a sharp turn southwards. Thousands of businesses went bust, millions of jobs were lost, innumerable dreams were shattered and the world was seemingly trying to shut down – as if someone had pressed the ctrl+alt+del keys on the earth’s computer. Surprisingly, none of the most able clairvoyants, even Nobel laureates in Economists, predicted such a catastrophe. Clearly, this was no cyclical recession, but a fundamentally damaging financial tsunami.

Ordinary people like me were left wondering – what the heck went wrong ? Who started all this ? What have I done to deserve this ? When will all this end ?

The origins of this disaster were sown in the sub-prime home loan market of the world’s No. 1 economy – the United States of America. Compounded by fancy financial derivates called CDOs (collaterized debt obligations), the falling prices of US houses had a domino effect on the financial institutions across the world with devastating effects. High leverage propelled by excessive greed proved to be fatal for even some of the most revered names in the world of finance. It was so crazy that an entire nation – Iceland – froze and went bankrupt ! Soon, with so many casualties and blood on the street, nobody trusted anybody, and this led to another crisis – that of credit. Lenders simply stopped extending loans. Obviously, all businesses and industries felt the numbing pain of this sudden surgical strike. Now the economy – the GDP – of almost all countries was running high temperature, if not already in the ICU.


The governments of the world, bewildered though they were of this unexpected crisis, quickly swung into action to resuscitate their beleaguered GDPs. They increased government spending, bailed out several bankrupt companies with the taxpayer’s money and reduced interest rates to unprecedented levels in a series of quick actions, aimed at ‘stimulating’ the morbid economy. But the rot was so deep that it is unclear to this day as to when and how the world economy will limp back to normal.

In the maddening din of the wild and extreme calamities, some voices started to rise saying that two countries held the key to the economic revival of the world – China and India. With 37% of the globe’s population between the two, and their GDPs growing at a scorching pace is the last few years, this seemed to be a believable and probable theory. But I found this funny in a somewhat dark sense of way. On the one hand, India and China were suffering and paying for the sins that the developed world had committed, and on the other the same perpetrators of the crime looked to these two populous nations to redeem them from their predicament.

Anyways, let us have a close look at the conjecture that India and China indeed have the formula to heal the crippled world. I will take India as a study object, and the conclusions can be extrapolated to China as well.

The conundrum called India is a hugely diverse sub-continent of 1.2 billion people. The population is nearly 4 times that of USA, the world’s numero uno economic superpower. With a nominal GDP of $1.21 trillion, India ranks 12th in the world order. However, on Purchasing Power Parity (PPP) basis, India has a GDP of $3.29 trillion and moves up several notches to the 4th place of the world economy rankings. Despite the global meltdown, India is still growing at an acceptable rate, albeit at a lower clip. All this augurs well for the ‘India can save the world’ argument.

But the US economy at a nominal (and PPP) GDP of $14.26 trillion is way too huge as compared to Mera Bharat Mahaan. With exports at only 15% of the GDP (China’s exports are 32% of its GDP), India has a miniscule impact on the world economy. Add to this the trade deficit and the burgeoning fiscal deficit, India will have its own problems to contend with, forget about trying to bail someone else out of its troubles. There is also an impending threat of drought in most parts of the country, threatening to stamp out the green shoots in the economic landscape.

In the best case scenario, India will scale back to 8-9% GDP growth rate in the next 2-3 years, thanks largely to its domestic consumption economy. In the worst case, inflation and interest rate will rise, consumer spending will fall, credit will be hard to come by, fresh investments will be scarce and the GDP will be thrown back to the Hindu rate of growth.

My take on the ‘Savior India’ hypothesis is therefore that India does not have a magic potion to inject life back to the world’s shattered economy. Only one nation – and let there be no doubts on this – USA holds the answer to the world’s economic woes. The giant has to get up on its own two feet and trudge back to what it knows best – make money. Of course, it needs to be supported by economic revivals in the Eurozone and Japan. As for India and China, let them take care of themselves first, and they will certainly emerge as major drivers of the world economic cogwheel.

Having said that, I am confident that US has put its worst behind it and there will only be good news from hereon. I only hope America has learnt its lessons from the excessive greed, regulatory failures and financial mis-adventures which plunged the entire world into a never-before crisis.

Endpiece : “If you build that foundation, both the moral and the ethical foundation, as well as the business foundation, and the experience foundation, then the building won't crumble.”- Henry Kravis

On Resigning

I could have called it “On Quitting”, but that sounds like a defeat, a giving up on a task undertaken. Whereas “Resigning” is a more dignified term, and looked at in one way means ‘signing on again’ – a very positive purport.

I resigned for the second time in my career a few days back. (Technically, it is the third time, because I quit my first job in about 15 days of joining). Putting in my papers for the first time was much more difficult, as I had worked for the company for 14 long and eventful years. It was my home and I felt like an orphan on severing ties with what meant the world to me. In fact, it was the only world I knew since I jumped into the Corporate Jungle. The second time of submitting my resignation came in after just over two years with the organization, but I was surprised by the hesitation I felt in carrying out the deed.

In these times of hop-skip-and-jump tactics adopted by corporate high-fliers, quitting perhaps is a second nature to many. But I’m sure that there are enough mortals like me who find it difficult to let go of an environment where you spend an enormous amount of your waking hours every day.

Why is quitting your job such a stressful, difficult act ?

Perhaps you are too comfortable in the cocoon that you are working in for a long time. You’ve got very familiar with people around you, and you feel secure in the knowledge that they know what you are capable of. This is assuming you are performing well in your work. There is a certain pattern in your life, and you don’t want to change the scenery very much. A life of repetitions has a strange soothing effect on our minds, as if reassuring us that life will be smooth if we just let it be. How complete is the deception !

But I believe that in an overwhelmingly large number of cases, it is the leap into the unknown that spooks the hell out of us in making a change. Why rock the boat when the waters are calm ? If it ain’t broke, don’t fix it. Such streams of logic lull our minds against altering our set way of life. As many job hoppers have discovered, a new workplace is no guarantee of a better career or life, plus there is added pressure of re-establishing your worth to your new masters. It is this fear of change which stops us dead in our tracks from hurtling towards an uncharted territory.

So is change to be feared or embraced with open arms ? Here’s the rub : even if you are not actively pursuing change, change is actively pursuing you – all the time. As the recent global meltdown has glaringly put to forth, change can disrupt you even if you are safely ensconced in a seemingly bomb-proof bunker.

For me, once I decided to take the plunge in unfamiliar waters, the next difficulty was to find a way to break the news to my boss without causing the slightest heartburn or unpleasantness. There are a whole lot of websites dedicated on ‘how to resign’, and I also consulted one of these, called http://www.i-resign.com/. Despite full preparations and going through carefully chosen words over and over again in my mind, I was tense when I walked into my boss’s room to apprise him of my intentions.

I came straight to the point. In a very polite, but matter-of-factly manner, I delivered the few sentences of my desire to throw in my towel. Though slightly taken aback by this unexpected turn of events, my boss was surprisingly encouraging of my decision, perhaps because I was candid enough to share even the position that I was taking up. He also appreciated that fact that I stuck with the company in its most difficult hour. I was left a little speechless by the conversation, and it was over in a short and smooth manner.

It was my turn to reel under the impact of the action just taken, partly relieved from an onerous task and partly bewildered by the genial manner of parting of ways. The little talk could well have been unpleasant and tricky. It took me the rest of the day to soak in the reality of resigning from my current job.

The lesson learnt is this : When it comes to resigning, the best way is to first break the news to your superior in person. Nobody likes nasty surprises, and bosses have a patent hatred for it. The more direct the message, the easier it is to confront any question that the boss may ask subsequently. People always value the honest truth, however unpleasant or damaging it might be. On the other hand, a lie or a less than honest presentation destroys your credibility forever. A verbal apprising of the intent can always be followed up by a formal, written resignation. The exit can be a lot less messy this way. And you would have ensured that you haven’t burnt the bridge while crossing the river.

Endpiece : "It doesn't take a lot of strength to hang on. It takes a lot of strength to let go" - J.C. Watts

It is time

Time to start my very own blog.

I've been planning to do this for some time now. I knew that starting a blog would be easy, but having the commitment to keep blogging would be difficult. Also, there was this nagging feeling that I'm probably too out of sync with the internet world, and bloggers belong to a different cosmos.

Then there was this problem of finding a name for the blog. I punched in a lot of name options, but to my chagrin the message "Sorry, this blog name is not available" kept popping almost instantaneously. So, I needed a lot of self-pepping up to bring myself to start my blog.

Finally, today is the day.

Perhaps its the season of monsoon, though with very little rain so far in Delhi where I stay, that prompted me to choose the name "Chaipakoda" for my blog. I wanted a chilled out connotation to the blog name, something which conjures up a sensation of relaxation and simple pleasures. A cup of hot tea with garam pakodas is not exactly 'chilled' in the literal sense, but that is what I like have when I chill out. Some like it hot !

What is the purpose of my blog ? Hmmm...can't I do this without any purpose ? Of course I can, but here are my objectives, in no order of importance :

• A place for mundane musings, which can sometimes turn into profound thoughts
• A cauldron of life experiences of an average corporate creature constantly in search of a new meaning
• A space to share my interests, opinions and ideas for a better tomorrow
• A mirror and sounding board in which to reflect and pour my feelings and thoughts
• Creation of something which lives on even if after I am long gone

Here's wishing all the best and a long life to my blog !