Honda hands its India car development to Tata Technologies to cut costs by up to 20%

Halving a development cycle of about five years leaves roughly two and a half years per model ^[16]. One of the people Reuters spoke to said the partnership had been under discussion for about two years before it was finalised ^[6]. In other words, Honda spent about 80% of the time it hopes to save on each model getting the deal agreed ^[17].

The term I would look at first is the choice of contractor. Tata Technologies was spun off from Tata Motors ^[8], one of the rivals winning the Indian buyers Honda is losing ^[9]. According to one person, Honda picked it for its broad network of local suppliers and because Honda managers believed it could design cars to Indian tastes and budgets ^[8]. Tata Technologies develops the cars ^[5] and Honda keeps the electronics ^[7]. Reuters describes this arrangement for one company in one market.

The choice also settles the dispute the sources described. Two people said Honda's Indian team wanted more local suppliers to cut costs and move faster, while Japanese managers wanted to keep established suppliers for quality and consistency ^[21]. The standoff delayed work on some products, they said ^[21]. On their account, the local-sourcing mandate the India team asked for has gone to an outside firm.

Set against the EV losses ^[2], the cost programme Reuters reported last month targets more than $9 billion over four years, or about $2.25 billion a year ^[3][18]. Honda posted its first-ever annual loss in the last financial year ^[14]. Reuters did not put a dollar figure on Honda's India development spending, so the 20% target ^[1] cannot yet be sized against either number.

India is the world's third-largest car market and remains closed to Chinese EV makers ^[15]. Honda's share there is about 18% of its peak ^[19], and it has little to sell in SUVs, the biggest and fastest-growing segment ^[10]. Honda said its line-up has not offered Indian customers "value for money" and that it is "redefining" what it sells there ^[12]. "We need to rebuild the business on an entirely different footing," President Toshihiro Mibe said in May ^[13].

If Tata's suppliers hit both targets, Honda gets cheaper models into India on a cycle half as long and can start on the SUV gap. In a worse outcome, Honda's quality oversight and retained systems ^[7] bring back the old argument between quality and local sourcing ^[21], and the cycle drifts back toward five years. Cheaper cars could also arrive on time and leave share where it is. "Honda is already late and behind competitors," one of the people said ^[11].

I think the second outcome is the likeliest way this fails. Honda's oversight is there to protect quality standards ^[7], and quality was the concern Japanese managers raised against local suppliers in the first place ^[21]. The counter-thesis is Honda's own: it denies any deadlock ^[22], and if its teams were simply collaborating, the oversight is routine and the risk to the schedule is smaller. A Tata-developed Honda in Indian showrooms about two and a half years after Tata Technologies' May announcement ^[4][16], built mostly from local parts, would prove this view wrong.