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CHENNAI : Honda Motor Co. is offering voluntary retirement to some permanent employees at its motorcycles and scooters unit in India amid slowing demand there following the covid-19 pandemic, the company said on Wednesday.

Honda Motorcycles and Scooters India (HMSI), the country’s second-largest manufacturer of two-wheelers, said it planned to realign its production strategy to improve operational efficiency and ensure long term business sustainability. “The Indian auto industry is going through an exceptionally challenging phase from the past three years considering the prolonged demand slowdown and overall economic fallout from the covid-19 pandemic," the company said in a statement.

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While automakers globally have been battered by the pandemic, companies in India have also been hit by slowing demand since 2019.

The move comes weeks after the Japanese automaker said it would shutter one of two car plants in India due to slowing demand. HMSI made the scheme available to its employees’ union through a letter dated 5 January, which was reviewed and reported by Reuters earlier on Wednesday.

The letter said the scheme was open to permanent employees who have completed 10 years of service or are over 40 as of 31 January, 2021. Depending on the number of years of service, a senior manager or vice president could be eligible for a payout of 72 lakh($98,488), the letter showed. While it was not immediately clear how many employees would qualify, the letter said the first 400 people to opt for retirement would get an additional 500,000 .

HMSI had more than 7,000 employees across its four plants in India as of 31 March 2020, according to a filing with the US Securities and Exchange Commission. Between April and November, the first eight months of the current fiscal year, HMSI’s sales plummeted 32% to 2.4 million units, with sales of motorcycles and scooters falling 25%, industry data showed. The automaker has capacity to manufacture 6.4 million motorcycles and scooters a year in India, according to its website. The company continues to see a strong potential to develop India as Honda’s global export hub in the mid-term and its investment plans for future products and technology remain unchanged, it said.

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