Consider this information to sales of july 2005. Not a direct comparison but you can still see the trend.
1. Suzuki Mehran: 2,526
2. Toyota Corolla: 2,084
3. Honda City: 1,665
4. Suzuki Cultus: 1,400
5. Honda Civic: 1,220
6. Suzuki Alto: 894
7. Daihatsu Cuore: 741
8. Suzuki Baleno: 695
9. Suzuki Bolan: 612
10. Hyundai Santro: 278
Honda City is the third best performing car. So what went wrong?
In my opinion, the designers concentrated too much on the design itself rather than the market. Now adding cool tech is all good, but they should have realized one thing..looks and size does matter.
If you are making a car that is equivalent to a corolla in price, then you must put in something there to attract the consumer.
Firstly, the new city is smaller in size then the new corolla...a big negative point for city. In Pakistan, size does matter and sorry Honda, your compact design might be better and even more practical but you failed the read the market and the consumer's mind.
Secondly, you are producing (or even introducing) a car for Pakistan and you should know its road conditions. Have something in it for comfort like better suspensions and more room (again the argument of size).
Thirdly, during most of 90s, it was the civic that competed with Corolla. So keep that psychology in mind. A city is generally considered to be inferior to a Corolla. Nobody's willing to pay the same amount and be considered to have bought a "smaller car". Would have been much better to downgrade city to compete with other models and have lower grade Civic compete with Corolla ranges. You seriously need someone trained in industrial psychology. A lower priced City (with lower specs) will dominate the likes of Swift,Liana and second hand imports.
Fourthly, all those ABS and what not are all cool but only if they come in additions to the basic requirement of the consumer. In simpler words, concentrate on the size, shape, and psychology because that is what will win you customers.
Finally, consider investing some money in the local market so spares of Honda become slightly cheaper and comparable to Corolla.
If anyone from Honda Pakistan is reading this, you do have a better product but are still failing. Time to realize you have been doing something very wrong. There is no reason for Toyota to be selling so many corollas when you can produce better cars. Those numbers (of sales) could be yours in a few years with the right understanding and approach to this market.