Honda aims 10 million units capacity in eight years

Japanese auto major Honda is embarking on an aggressive ride in India to challenge the number one position of erstwhile partner Hero in two-wheeler segment with plans to produce 10 million units by 2019-20 that may entail the company having up to eight plants in India.

Besides, the company's Indian arm Honda Motorcycle and Scooter India (HMSI) plans to accelerate the rate of new model launches while lowering prices of the products by increasing localisation levels. It will also hire up to 4,000 people for its third plant in Karnataka.

"With our third plant coming up in Karnataka, in fiscal 2013-14 we will have a total production capacity of four million units. In the long term, the target is to have a capacity of 10 million units by 2019-20," HMSI President and CEO Keita Muramatsu said.

When asked how many plants would the company need to have in order to meet the envisaged target, he said based on its current capacity, "about seven to eight plants" will be required.

Honda's erstwhile partner Hero MotoCorp has already announced its intention to have $10 billion turnover in the next five years with sales of 10 million units, out of which exports would be 10 per cent of the total sales.

HMSI's Manesar plant has a capacity of 1.6 million units annually, while that of the Tapukara plant is 1.2 million. The upcoming plant in Karnataka will have the capacity of produce 1.2 million units per year initially.

Muramatsu declined to comment on the investments required to meet the company's long-term target saying the focus currently was on the third plant in Karnataka, which is expected to start production by the first quarter of FY14. The company is investing Rs 1,500 crore (Rs 15 billion) on the plant.

HMSI will hire 3,000-4,000 people for the new plant, Muramatsu said, adding "when all the three plants are operational the company will have a total of 13,000-14,000 workers".

Commenting on the new products programme, he said: "We want to accelerate the introduction of new models, reduce product development time, and bring down the price of products. We want to utilise local sourcing and production infrastructure and create products for customers in India through our research at our new technical centre."

HMSI has invested Rs 150 crore (Rs 1.5 billion) at the new technical centre at Manesar, where Honda Research and Development India, a wholly-owned subsidiary of Honda R&D, Japan, is also shifting its entire two-wheeler operations in India to facilitate closer coordination and synergy of operations.

In terms of sales, Muramatsu said the company has crossed a cumulative of 10 million customers and it expects to touch the 12 million milestone in the next fiscal.

To boost sales, HMSI is also expanding network and plans to add new 500 outlets to have a total of 2,000 sales and service touch-points across India by FY13 end.

On the export front, he said products developed in India could find their way to similar markets like Africa and Latin America. Already HMSI is exporting products to Latin America.

Honda is allocating maximum resources to develop HMSI as export hub and enhance its motorcycle business in markets such as Sri Lanka, Nepal, Latin America and Europe.

HMSI will start exports of completely knocked down units to Honda's new joint venture company in Bangladesh in 2013 end.