Production at Rajasthan facility of Honda may be delayed due to lower sales

Wednesday 30 May 2012, 23:17 PM by

Honda Siel Cars India Ltd., which had earlier planned to commence production at its second manufacturing unit in Tapukara, Rajasthan may delay its plan. The company is already facing lower demand for its City, Civic and Jazz models. Another reason for this delay is that half of the capacity of its car facility near Delhi is still unused.

In order to achieve target of one million units sales volume by 2015-16 in India, the Indian leg of Japanese company, Honda Motor, has to sell 500,000 cars in next 3 years. The Indian subdivision of the car maker was set-up and has been operational in the country since 1997.

Of the annual capacity of 1,20,000 cars at Greater Noida plant, more than 50 percent is idle due to low sales volume caused by shortage of parts. As Japan and Thailand, the two country from where the company sources parts, were hit by Tsunami and flood respectively in 2011. Besides this, Honda does not have any diesel run car in its portfolio, which is a huge setback as diesel is cheaper than petrol by 40 per cent in India.

The Tapukara plant had been inaugurated by the car maker in 2008 but the global financial crisis delayed the operations. Spread over 600 acres, the facility will have an initial annual capacity of manufacturing 60,000 units. It also incorporates a top-of the-class press shop and engine manufacturing plant, where body panels and power-train components for Brio, Jazz and City will be produced.

Newly appointed President and Managing Director (MD), Honda Siel India, Hironori Kanayama, said, “All of these units will be manufactured at our Greater Noida plant.” he also added, “As far as starting operations from Tapukara plant is concerned, it depends upon the market conditions and today that situation has not come.”

The sales of the company have witnessed a northbound climb with the huge success of its Brio. It sold 3,500 units on an average every month since the production commenced in February. Even though, the overall car sales in the country witnessed a growth of 2.19 per cent, Honda India witnessed a decline of 8.5 per cent with sales 54,427 units in FY 2011-12.

Honda Siel, however, has zealous plans in the country. Kanayama said, “We will see significant changes over the next two years. The vision is to make Honda the best car brand in India in the next five years. We will re-orient our strategies.” Adding further he said, “We will face challenges on the way. The Indian economy is going through challenging times due to various reasons, that’s having an impact on the auto industry.”

Managing Director, IHS Automotive India, Deepesh Rathore said that apart from increasing the portfolio in the mass car segment outside Brio, Honda must introduce more diesel variants to attain its one million target.

He said, “Once that happens, there will be an explosion in demand for Honda cars.” Adding further, “In that case, the company will need fresh capacity for Brio, which is likely to have a diesel variant and they might as well start operations in Rajasthan.” According to him the company should consider introducing an entry level sedan. This should be to take on cars like Maruti Suzuki India Limited's Dzire, Hyundai Motor India Limited's Accent and Tata Motors Ltd’s Indigo. He further added, “It may also look at the MPV (multi-purpose vehicle) segment and bring in a competition to Maruti’s Ertiga.”

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