New Delhi: Honda Motorcycles and Scooters India, a unit of Japan’s Honda Motor Co. Ltd, may build four-five new factories to make 10 million units every year by 2020, hoping to become the nation’s largest two-wheeler maker.
“Our dream is to have an installed capacity of 10 million by 2019-20, but it will be subject to external conditions,” said Y.S. Guleria, vice-president, sales and marketing. “We will need at least four-five new plants to reach there.”
The new plants could take the total number of facilities in the country to as many as eight.
Mint had reported in November 2011 about Honda’s ambitions of becoming the leader in the country by having a manufacturing capacity of at least 10 million units.
The report said the company is already in exploratory talks with the Gujarat and Uttarakhand governments for setting up the plants over the next three-four years.
Although two-wheeler sales have slowed this fiscal, the local market is still expected to grow at an average annual growth rate of 14% till 2020, according to the Society of Indian Automobile Manufacturers. At this rate, the market is expected to double every four years. In the six months ended 30 September, two-wheeler sales rose 3.12% to 6.78 million. That compares with the 14.2% growth in the last fiscal.
Honda India’s market share in the first seven months of this fiscal to October stands at 19.3%. Parent Honda Motor exited its two-wheeler joint venture with the Hero Group in December 2010 to focus on its fully-owned Indian unit.
Honda India already has two factories in Gurgaon, and Tapukara in Rajasthan, with an annual capacity of 2.8 million units. It is building a third facility in Narsapuram in Karnataka, which will add 1.2 million to its capacity in 2013.
In the coming years, manufacturers will look to have plants across the country in order to save costs, said Deepesh Rathore, managing director, IHS Automotive, a research firm.
“Two-wheeler business is going to get more and more competitive and companies would like to improve margins. In order to do that, they will have plants across the country to save logistics cost,” said Rathore. “Having said that, I believe this kind of capacity ramp up may lead to some idle capacity as well. So we might as well see some huge focus on exports from these companies.”
Honda will also set up a technical centre at its Manesar facility that will help it make affordable products and increase localization of parts.
The company will invest around Rs.150 crore and hire 200 people for the centre, to which it will shift the two-wheeler segment of Honda Research and Development India.
Of the 200 people, 50% will be from Honda India and the rest will be from the parent, the company said.
“With this centre, we will focus on India users with more concentration on local market. We will be modifying our existing products as well as develop from the scratch,” said Keita Muramatsu, president and chief executive, Honda India.