Honda said on Wednesday it has decided to defer capacity expansion at its second Indian plant in Rajasthan besides cutting production at the existing facility at Greater Noida, near Delhi.
The company, which runs its Indian operations through a joint venture with the Siel Group -- Honda Siel Cars India -- said it would postpone capacity enhancement and assembly operations at its second plant in Tapukara, Rajasthan.
Addition of new capacity, initially scheduled for Q4 of 2009, has been deferred in view of the current economic slowdown, which has impacted the automobile industry, resulting in a drop in demand, a senior offical of HSCI said.
"While work on shed is still continuing and structures will be ready, installation of equipment will not be happening," the official said.
The company had anounced an initial investment of Rs 1,000 crore (Rs 10 billion) at the Rajasthan plant, of which Rs 600 crore (Rs 6 billion) had already been used.
HSCI had planned to set up the second plant in Rajasthan with an initial capacity of 60,000 units, while it expanded capacity at it Greater Noida facility to one lakh unit per year.
The official said production at the Greater Noida facility would be reduced, without specifying quantum, in view of the negative growth in the Indian automobile industry and in the interest of maintaining lean operations.
"We are closely monitoring the market situation and will adjust monthly production volumes to respond promptly to market demands while ensuring operational efficiencies and low inventory levels," the official added.
Honda Motor Co president and CEO Takeo Fukui announced in Tokyo that expansion of automobile production capacity in some countries, including India, initially scheduled for 2010, and Turkey, initially scheduled for mid-2009, will be delayed considering the current market situations.
Asked if the plans would affect the company's planned roll out of its premium hatchback Jazz, the official replied in the negative.
"It is on track for June 2009 launch," the official said, however, adding that Honda would continue to assess the market situation to decide on the timing of the car roll-out.
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