As the two-wheeler domestic wholesales continued to post negative growth for the eleventh month in a row in October 2019, a top executive at Honda Motor Company Ltd told Mint that demand for new vehicles may take another two years to recover completely.
Due to the anticipated price hike, Noriake Abe, Managing Officer at Honda Motor Company, expects the demand to remain subdued during Q1-Q2 of next fiscal.
Referring to the latest BS VI emission standards, which may lead to a 10-15% hike in the prices, Abe said “The demand recovery may happen in another two years. The regulations in India are rapidly changing. All vehicle makers must change their models. Every change may be an opportunity for us."
In April last year, the mandatory safety norms involving compulsory fitment of anti-lock braking systems (ABS) and combined braking systems (CBS) for all two-wheeler models had resulted in price hike of Rs1,500 – Rs10,000. Besides, rise in the insurance costs, credit unavailability and liquidity crunch in the economy, negatively impacted the retail demand for vehicles.
Abe said that the management has revised the target for its Indian two-wheeler arm, Honda Motorcycle and Scooter India Pvt Ltd (HMSI), to 6 million units for FY20, which is less than its total sales in FY2018.
However, the two-wheeler maker does not plan to cut down its capex for FY20. “We will continue to invest in the motorcycle and scooter market in India but we are not looking at expanding our production capacity for now," Abe further said.
HMSI’s total annual production capacity now stands at 7 million units across four plants.
The company is investing ₹2,400 crore in FY20 that includes expenses involved in ensuring compliance with the incoming BSVI emission norms of its entire model line-up.