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Honda to set up world’s largest scooter plant in Gujarat

The Economic Times:  August, 2014

New Delhi: Honda Motors, which is swearing by scooters in India, is setting up the world's largest scooter plant in Gujarat to roll out 12 lakh units annually and achieve leadership position in the Indian two-wheeler market, especially with a growing number of customers shifting to this unisex multi-utility mode that has caught the fancy of many and outpaced almost every other segment.

Scooter sales have jumped by 29% in the ongoing fiscal, and now form 27% of the total two-wheeler market from just 8% a decade back. The ever-rising demand for scooters that has far outstripped supply has prompted Honda to set up its first dedicated scooter plant in Ahmedabad. "Even as we have more than doubled our scooter capacity in India, we have not been able to match up with the demand.

After 13 years of its launch, Activa continues to be on 'waiting' even as competition has multiplied ten times," said YS Guleria, Honda VP for marketing and sales in India. Honda had fired the imagination of scooter lovers with its Activa — launched way back in 2001.

"Even though we raised our production with three new scooters, demand still outstrips our estimates. While scooter production has trebled in the past decade, we still have a backlog of 60,000 scooters that should multiply in the festive months ahead," Guleria added. Honda would spend Rs 1,100 crore on the new plant in Ahmedabad, and expand its range with a few more offerings.

The company, which leads the scooter market with a 53% share in the domestic market, would have two assembly lines for scooters, which would create 3,000 more jobs. The fourth plant would enhance its cumulative production capacity in India to 58 lakh units by 2015-16, including 16 lakh from its first plant in Haryana, 12 lakh from the one in Rajasthan, and 18 lakh from the Karnataka plant.

The sales from its Indian subsidiary have already climbed to the second spot for Honda's two-wheeler business worldwide, and it believes that the fourth plant would help India become its top global market. Honda's decision for a dedicated scooter plant is backed by an overwhelming response to its five scooter brands which have been runaway successes in India.

In fact, all big auto companies — Hero MotoCorp, Suzuki, Yamaha, TVS Motors and M&M — are planning to expand in an effort to cash in on the exploding demand. They have gained from a surge in sales in the first quarter that has helped the segment post record high sales of 1.01 million units in the April-June ended period. Scooters grew 23% to sell 3.60 million units in the fiscal ended March.

Analysts said that the new generation automatic scooters, that are unisex in nature and are fuel efficient, have helped them grow manifold over the more traditional roughand-tough bikes. "Going by the shift, they (scooters) are expected to corner a third of the market," said Deepesh Rathore, director at EMMAAA , a Delhi based consultancy firm.