Why is Honda Expensive from its Peers

Honda is the top bike seller company in the entire world having a good reputation.

The company gradually increased its products line and made it relatively more expensive than others.

The company launched its first motorized bike, sold through bicycle shops.

However, the bicycle was the only medium of transportation then. Their motorbikes grabbed the customer’s attention when they came to buy bicycles.

This strategised plan helped the company to sell its product setting up around 50 thousand shops around Japan.

Initial steps of Honda was to publicly showcase their products as they entered the market.

The company kept its products price low as they wanted to gain market share.

List of things we are going to learn

1. The reason behind Honda being expensive
2. Reasons For Honda being expensive
3. Future regulation of price
4. Conclusion
5. FAQs

The reason behind Honda being expensive

The company was progressing in the market with its new technologies but required a lot of funds.

Therefore, the primary source of revenue came from their products so they had to increase the price.

New products which were equipped with the latest technology required research & development.

The investors were interested in Honda as the company was emerging as a well-known brand.

The investments were not enough for the company to fulfil its development program.

MotoGP

When Honda entered in the racing the company they had limited budget for the racing team.

In the initial stage, the company entered with a small fund just to showcase their bikes but they continued to race.

The company was facing difficulties to maintain its R&D support for the racing.

Track motorcycle is very expensive requiring a large number of man-power to create a single-engine.

The team constitutes of engineers, mechanics, technicians, and electronic engineers and highly skilled racer.

Hence, racing bikes need a huge amount of investment and work-force to compete in the race.

Formula 1

A huge amount of expenditure was incurred by the company just to create a bike to race.

Some of the expenditure is recovered by various ways like sponsorships, merchandises and guest appearances.

When the company fell short of investments they deliberately increased the price of its product.

The formula cars are very expensive as it requires around 1500 members and expensive components to create a single racing machine.

The vehicle is bounded only for tracks as formula cars are street illegal due to its various features.

Reasons For Honda being expensive

The price of a vehicle also depends on the government as it can implement various laws on automobile industry through the environment and people safety acts.

Government Factors

The government can regulate the price according to the product as the company is using expensive parts in the product.

According to the product, the government regulates taxes on the company.

Also, Import duty on raw material tends to increase the vehicle price.

Research and Development Factors

When Honda was growing they had to set-up new factories which required funds for those projects.

The company invested in its R&D projects taking a huge amount creating a shortage in their budget.

Honda in their initial stage had to spend a lot of their fund in the establishment of R&D division, particularly in their manufacturing department.

Honda took up several investments to cover their expenditure but it was not enough.

The company set-up their R&D not only in Japan but also in Belgium.

Honda decided to open a facility in Belgium to help them deliver their products to other nations easily and efficiently because Japan was farther away.

Establishing an R&D and manufacturing facilities require a huge amount of fund.

Honda had to purchase several licenses in the country before operating their business.

Tariffs

Honda automobiles started their company as a bike manufacturing company but they evolved into other products.

The price of the products also increased significantly resulting in the price to be more expensive than other companies.

They wanted to expand their business but they did not have plants in other countries. Their manufacturing department was primarily based in Japan.

They opened numerous dealerships in different countries but lacked factories and assistance.

The company had to export their product to different countries which increased price because of the import duty charged.

This made Honda vehicles expensive comparatively.

Also, external factors also made an effect on the price like increased tax rates on the specific parts used in manufacturing.

Fixed cost factors

As Honda holds its ground in maintaining its quality product and ensure its durability.

They had to spend their resources in their quality check processes and used better parts to maintain their standards.

Hence, Honda is relatively more expensive than other companies in order to uphold its quality.

Future regulation of price

Due to economic slowdown, Honda is going to reduce new model line up of cars

Honda might reduce their prices with people will spending less money on the automobile now. If they don’t, they might lose some of their dealerships failing to control their expenses.

Honda is also researching on E-cars making it cheaper than the fuel cars but being in the initial stage they might be costly

The company will use discount campaigns to clear their inventory of their past generation vehicles clearing storage for the new ones.

Honda has hardly any plans to increase its manufacturing facilities globally.

Conclusion

The reason behind Honda being expensive in the global market was because of its standard of quality which they always abide by.

The expenses during their research facility also inflate the price.

The export and import charges on the vehicle tend to caries the price a lot which makes them automobile relatively expensive.

FAQs