New Delhi: Honda Motorcycle and Scooter India Pvt. Ltd (HMSI), the country’s second largest two-wheeler manufacturer, has earmarked Rs800 crore as capital expenditure for FY2019, which will mostly be used to upgrade existing offerings of the company to Bharat Stage VI (BS VI) emission norms.
The current fiscal will see the launch of one new product and 18 refreshes of existing products. The announcement by HMSI is testament to the enormous task at hand for the auto industry—complying with the BS VI emission norms by April 2020. This is drawing huge investments from manufacturers across segments.
Further, HMSI under president and chief executive Minoru Kato will look to shift some of its scooter customers to the Grazia and bring in new customers for its motorcycle segment through the X-Blade to reduce dependence on the Activa—the highest selling scooter in the country.
“We will use this investment for the BS VI preparation. The model line-up needs to change. As a result of the BS VI norms, the total motorcycle market may struggle to increase for some time. We have plans for new capacity but it will only be decided after 2020," said Kato.
The Union government, in an effort to curb pollution, decided to bring forward the date of implementation of BS VI emission norms to April 2020, skipping an intermediate level—unprecedented in any other country.
HMSI since its inception has been heavily dependent on the Activa for generating a significant part of its volumes and, in the coming years, the company is expected to shift some of its customers to its new product Grazia in order to reduce the dependence.
With the new motorcycle X-Blade, the Indian unit of the Japanese auto maker is aiming to increase its market share in the motorcycle segment, where it has not been as successful as in the scooter segment.
“Last year we launched Grazia as a top-end 125cc scooter. We expect more numbers of existing Activa 110cc customers to upgrade to Grazia, three to five years down the line. That kind of upgrading we are going to focus on. Also, motorcycles in the 150-160cc segment have been doing well. So we launched the X-Blade to increase our volumes," said Kato.
The company also has plans to introduce a new motorcycle in the 250cc-plus segment, which is dominated by Royal Enfield, manufactured by Eicher Motors Ltd.
Double digit volume growth may lead to capacity constraints for HMSI, which has an total installed capacity of 6.4 million units across four manufacturing units in India.
In FY18, the company’s volumes increased 22% to 6.1 million units, and if the demand remains high, then the company may have to add another shift at its manufacturing units.