3 min read.Updated: 23 Dec 2020, 07:25 PM ISTAmit Panday
The company said the move would also help in terms of maximizing capacity utilization at the bigger production site at Tapukara in Rajasthan
In order to cut costs, conserve cash and consolidate production at one facility amid the ongoing coronavirus pandemic, Honda Cars India Ltd on Wednesday announced stopping car production at its Greater Noida unit.
The company said this move would also help in terms of maximizing capacity utilization at the bigger production site at Tapukara in Rajasthan. Honda produced the popular City midsize sedan, along with assembling the premium sedan Civic and the CR-V sport utility vehicle at its Greater Noida unit.
“The larger intent behind this decision to consolidate is to be here in India and participate in its long-term growth story. To do so we need to de-risk our business and make the operations sustainable. The market has not been amenable for carmakers over the past 2 years," Rajesh Goel, senior vice president and director for marketing and sales at Honda Cars India told Mint in an interview on December 23.
Goel said the move would result in discontinuing the assembly and sales of Civic and CR-V SUV models in India while shifting the production of City sedan from Greater Noida plant to the Tapukara unit.
“The Greater Noida plant was producing the City, Civic and CR-V. City, meanwhile, is also produced at the Tapukara plant. We are shifting entire production of the City sedan to the Tapukara unit. We are discontinuing Civic and CR-V because shifting them to Tapukara would have entailed additional investments, which would have meant moving the pricing away from the customer expectations," Goel said.
He added that the decision would not alter the customer ownership experience, as the company would continue to provide service and spare parts to the existing customers of Civic and CR-V for the next 15 years.
Goel also clarified that Honda’s mid- and long-term plans for India remains unchanged.
“Everything that was planned for India with respect to investments on new products in the mid-term remains on track. We are not cutting down or reducing our product investments at all. This decision is to ensure that Honda is here for a long haul," he told Mint.
Replying to whether Honda is in talks with other automakers, including Chinese carmakers eyeing to set up operations in India, to sell off its Greater Noida unit, Goel said, “There is no doubt that Honda will continue to retain the ownership of the unit as it remains an important location for us."
Honda’s Greater Noida unit would continue to house teams across the corporate office, finance, accounts, human resources, purchase, among other departments, he said.
“Besides, that, all the research and development related to four wheelers would continue to operate at the said plant, along with the spare parts operations for two- and four-wheelers, and power products including the warehouse. Even after this consolidation, we will have more than 1500 people working at the site,"Goel said.
Post discontinuing the two aforementioned models, Honda would be left with only four cars – City, Amaze, Jazz and WR-V – in its portfolio for the India market.
Honda’s volumes and market share, which used to be about 7% in FY2015, in the passenger car segment has halved over the last five years as the company failed to capitalize on the demand momentum for key categories including premium hatchbacks, compact and midsize SUVs.
Declining to comment on specific product categories Honda would focus on in the near future, Goel said, “Our immediate focus is to de-risk and make operations sustainable for the future. This is a big decision as a company, and if we are able to follow it through and see benefits accruing to us, as planned, then we will start re-looking at what we want to do."