MUMBAI – Honda India’s turnaround strategy has the automaker headed in the right direction.

Under CEO Hironori Kanayama, the automaker is recovering from a slump in which its market share had fallen by half, to 1.6%, in 2012.

Kanayama arrived in India in March 2012, when Honda was coming off a 24.1% year-on-year drop in 2011 sales. Over the course of that year, the automaker’s deliveries climbed 46.6% to 106,788 units and its market share rebounded to 3.2%.

The recovery has maintained its momentum this year with 101,225 sales after only seven months, up 63.3% from like-2013, and a near-doubling of market share to 6.1%. In July Honda added a light truck to its lineup, the Mobilio MPV, and delivered 3,819 of them that month while securing 10,000 advance bookings within a week of launch.

“Our counterattack has started,” Kanayama says lightheartedly.

Besides the 7-seat Mobilio and fourth-generation City sedan, the counterattack will see emphasis shift from upmarket models to a yet-to-come small car and compact SUV that maintain Honda design and spaciousness.

Kanayama ascribes Honda India’s struggles in 2011 and 2012 to a series of missteps and misfortunes.

Honda at the time had neither a small car nor a diesel engine, leaving market share to rival automakers. Despite this, the automaker continued to focus on upmarket, relatively costly cars such as the Accord, Civic and CR-V. Even the cleverly engineered Jazz was an expensive hatchback.

Because these cars needed imported parts, and the declining rupee-dollar exchange rate increased the cost of such imports, Honda was affected more than other automakers that had localized their parts sourcing to control costs. Honda also was hurt more than others by rising vehicle and gasoline prices.

Struggling for volumes, Honda dropped every model but the CR-V and refilled its portfolio with the popular, affordable Brio hatchback and well-engineered Amaze compact sedan. The Mobilio launched in July and appears to be on track to becoming India’s most successful MPV since the Toyota Innova.

The Amaze, City and Mobilio all offer a choice of a gasoline or diesel engine.

“We have a very strong brand here and we know now the kind of cars the Indian market needs,” says Yoshiyuki Matsumoto, who has joined Kanayama’s Indian team as a managing officer.

Regaining competitiveness, Honda is moving ahead with development of the new-generation Jazz with both 1.5L i-DTEC diesel and 1.2L i-VTEC gasoline engines. More local parts sourcing, as in the case of the new City and Mobilio, is attracting buyers’ attention to the automaker’s quality and service.

Honda also is developing a compact car and diesel SUV, both based on a re-engineered Brio platform and expected by 2017. The small car likely will be priced below Rs400,000 ($6,500).

There are reports that Honda may add a third plant in Gujarat with an investment of $700 million to create additional capacity of 125,000 units. Matsumoto says the new investment in capacity expansion would follow as soon as the current capacity of 240,000 is fully utilized.

Honda also is creating a fully equipped R&D operation in India, Matsumoto says, adding, “What is important is the speed of development and we are relying more on local talents and resources.”