Specs in the City

The Thai Baht has increased roughly 25 per cent in value against the Australian dollar over the last six months. For a currency that slumped badly during the Asian economic crisis back in 1997, it sure has bounced back!

The Australian dollar has suffered against the Baht, the US dollar and other currencies, because as a country we're perceived to be an exporter of commodities -- and speculators have been selling the farm, so to speak.

That's why the Thai-built Honda City is one of the more expensive light cars you can buy. With the entry-level City VTi manual priced at $20,490, the car starts $4000 more expensive than the South Korean-built Holden Barina sedan and $2000 beyond the price of the Toyota Yaris YRS sedan.

All three cars are deemed by industry statistician VFACTS to be light cars in the Australian market. A price above $20,000 for the base-grade variant of a light car has previously been the preserve of European offerings. Not any more.

None of the three cars offer buyers stability control. Both the Holden and the Toyota have been on the market for a few years now (although the Barina was upgraded just late last year), so these two cars missed the rush to begin marketing smaller cars with the undoubted safety benefit of electronic stability control.

Recently released hatchbacks in the light car segment from Ford, Hyundai and Mazda offer stability control as an option at least, but what happened with the City and its hatchback sibling, the Jazz?

There was some failure of corporate foresight when specification for the two Hondas was decided -- and this casts the relatively high price of the newly introduced City into sharper relief.

"[Stability control] will be coming by 2011," journalists were told by Honda Senior Director, Lindsay Smalley at the launch of the City last week.

"As you're aware, ESP [Electronic Stability Program] is a great technology -- no issue. But it's not in the front of mind in the Asian region. If you're in a traffic jam in Bangkok, the last thing you think about is ESP. You want a good aircon... and stereo."

So the two light cars from Honda are going to have to make do without the selling advantage of stability control for two years. It's actually the Jazz that's more adversely affected by this than the City, since virtually none of the City's (sedan) competitors feature stability control either.

The Ford Fiesta sedan, which has been confirmed for launch in Australia about 12 months from now is likely to replicate the five-door hatch variant's specification and, if Ford can keep the price of that car down, it poses a significant threat to the City's sales. With the Ford's hatchback variants to be sourced from Thailand, it's likely the sedans will be also, and since the City is sourced from the same country, the comparative pricing picture will be interesting when the Ford arrives.

And on the subject of pricing, the City is so close to the larger Civic because the Australian dollar has lost so much value against foreign currencies. Honda expects that the City's current price, which can be maintained for some time, will start to look like better value as the competition's prices begin to rise in response to changing inventory and a continuing low exchange rate for the Aussie dollar.

"As soon as the industry in general has quit its stock holdings -- unless people want to sell cars and lose money -- they're going to have to shift the prices up," explains Smalley on that point. Furthermore, he admits that the City is likely to steal sales from the Civic, since it's so close in pricing to the larger car and offers small-car packaging for an (inflated) light-car price -- but that's a calculated risk for the importer.

"Until the price starts to grow a little bit, I certainly think there's an element of risk [that City will cannibalise Civic sales], but we're prepared to take that risk."

That's the whole point. It's not like the City is priced high on launch and will continue to be relatively high by the standards of other cars. It will remain at the current pricing level as competitors and other models in Honda's product range rise in price. Prices for the Civic range are set to rise this year as new inventory arrives -- paid for in a new regime of a dollar being worth 23.06 Baht, versus 31 Baht in August of last year. How will Ford go in 12 months?

"We think that this is such a car for the times, we're not going to not bring it into the market because we might cannibalise 10 per cent of Civic sales," says Smalley. There's an element of brand management in bringing the City to market, as he explained.

"For us, it's more potential for a younger buyer; we think we'll be able to get younger folk into this, create a new image -- quite a strong, youthful image for it.

"We want to try and shift our buyer profile and image to a younger generation. We need to capture X and Y-Gen people, so that we're fertilising the soil for the future.

"The majority of Civic buyers are VTi [buyers] -- at that bottom end of the range. Their age group is 45 to 55."

In the longer term too, the City represents the sort of design philosophy that may take hold across the entire market -- bigger packaging within a small footprint. We've seen small cars grow into what were once mid-size cars and medium cars swell to large-car proportions.

Now, with cars like the Mazda2, Fiesta and the Jazz/City duo, car companies have placed a ceiling on external dimensions and weight, with the plan to increase interior space and reduce overall mass. This fits in with the world's rush towards more efficient frugal cars that are smaller, but will accommodate the same number of passengers in equivalent safety.

So, as for its competitors, Honda is paving the way for today's Gen-Y buyers to narrow the scope of their car-buying expectations. Short on stability control and (currently) expensive to buy, the City may be -- but it and its successors are likely to be the 'Civic' of the next decade.