By Chang-Ran Kim and Vithoon Amorn
BANGKOK, Nov 19 (Reuters) - Honda Motor Co , Japan's second-largest auto maker, has come a long way in Thailand against the odds.
Despite being among the last to enter the Thai passenger car market, it is now the country's number-two brand after Toyota Motor Corp , which has been making cars there for nearly 50 years.
At least one in every three cars in Thailand has a Honda badge now, but the auto maker has bigger ambitions: it wants to overtake Toyota -- whose car market share stands at 47 percent -- to become the number-one in both quality and quantity.
"Toyota has gone ahead of us in offering products that meet local tastes," said Yoichi Aoki, president of Honda's Thai unit. "Our most crucial task is to offer attractive models at the right timing while becoming more price-competitive through cost cuts."
Aoki admits that won't be easy.
In the same subcompact class, more Thais prefer Toyota's Vios over Honda's City, even though the prior costs slightly more.
With 82 percent of the components for the City already bought locally, Honda has little room to cut parts costs, Aoki said.
"We have to approach the issue with a completely different concept," he said, adding that downsizing the engine would be one possibility.
Another approach Honda is taking is offering products in segments that don't exist in Thailand's fledgling car market.
On Tuesday, Honda launched the five-door Jazz subcompact hatchback with a show featuring a dozen young, lightly-clad techno-dancers. It wants to sell 16,000 units next year -- about a fifth of its total sales forecast of 70,000 units for 2003.
"We are the first company to try to make this type of vehicle popular in Thailand," Satoshi Toshida, chief operating officer of Honda Asia and Oceania, said at the launch.
But Honda knows it needs to watch its back. Toyota has been known to follow Honda into successful segments in Japan, only to crush sales of its forerunner with more attractive features.
Toyota moved to do just that in Thailand on Wednesday, launching the Wish minivan to compete with Honda's Stream, which debuted late last year. A 22 percent plunge in Honda's Japanese non mini-car sales this year has been blamed largely on the Wish's assault on the Stream.
DAVID VS GOLIATH?
Honda's task is tough because its gradual increase in market share has come not at the expense of Toyota, but of other brands such as Mitsubishi Motors and Nissan Motor .
Honda says it can do more to expand sales, including building more showrooms, but knows Toyota can and will do the same to maintain the gap.
Honda plans to boost the number of showrooms by 20 percent to about 120 next year, but Toyota will trump it with a 25 percent increase to 300.
"A strong point for Toyota Thailand is our after-service thanks to the large number of dealerships," said Panat Piyathummaporn, chief engineer at Toyota Motor Thailand.
Having fewer showrooms poses another challenge.
Aoki said Honda lags Toyota in customer satisfaction partly because one of its sales staff sells an average 10 cars a month, compared with an average six cars for Toyota.
"We feel the appropriate level is eight per month per salesperson, so we need to work on this," he said.
Still, it may be early to write off Honda's ambitions.
Its achievement of a record-high 35 percent market share is noteworthy given that it has only 20 showrooms in Bangkok -- which accounts for three-fifths of the car market -- compared with over 60 for Toyota. Honda also has a much leaner line-up, with seven car models versus 16 for Toyota.
"Toyota's longer history in Thailand's car business poses a big challenge for us, but we'll keep pressing ahead," Aoki said.