Honda to invest Rs965 cr to expand capacity for cars, bikes

New Delhi: Japanese auto manufacturer Honda Motor Co. will invest Rs.965 crore in its two-wheeler and car businesses in India as it looks to increase production capacity.

The plan is to increase manufacturing capacity by 600,000 units for two-wheelers and by 60,000 units for cars by 2016, Honda’s local units said in two separate statements.

While Honda Motorcycles & Scooters India (HMSI) will invest Rs.585 crore in its third two-wheeler production plant in the Narsapura area near Bengaluru, Honda Cars India Ltd (HCIL) will invest Rs.380 crore in its Tapukara plant in Rajasthan.

The expansion of the second plant will increase HCIL’s overall annual production capacity from the current 240,000 units to 300,000 units including the 120,000-unit capacity of its first plant in Greater Noida on the outskirts of New Delhi.

HMSI’s annual production capacity will reach 6.4 million units, combined with that of its fourth plant, which is scheduled to become operational in the first half of 2016 in Gujarat.

These investments will also require an additional workforce of 2,500 people, of which 1,900 will be employed by the two-wheeler maker.

The fresh investments are intended to strengthen the company’s operations in India in deference to Prime Minister Narendra Modi’s Make in India campaign, according to Keita Muramatsu, president & chief executive, HMSI.

“This investment will provide new opportunities for expansion of brand Honda in the largest two-wheeler market of the world,” he said. “Honda is strengthening its Make in India resolve through steady and strategic investments with a long term objective of creating 39% additional capacity within 3.5 years.”

Modi launched the Make In India campaign in September to attract foreign companies to invest and manufacture in India and export to other countries after leading the National Democratic Alliance to victory in the April-May general election.

India has set for itself an ambitious target of increasing the contribution of manufacturing output to 25% of gross domestic product (GDP) by 2025, from 16% now.

In 2014, industry-wide motorcycle sales in India increased to 16 million units, a year-on-year increase of 10%. In the same year, Honda motorcycle sales increased to 4.2 million units, a year-on-year increase of approximately 30%.

In 2014, sales of passenger vehicles in India increased to 2.55 million units, a year-on-year increase of some 3%. In the last 10 years, the market has grown around 2.5 times, making India the world’s sixth largest automobile market when sales of commercial vehicles are included.

Honda Cars said the new investments are driven by strong sales momentum for its cars. “India has emerged as a very important market for Honda and holds great potential for future growth as well,” it said in its statement.

HCIL is the fastest growing automobile company in India with a 44% increase in its domestic sales during April 2014-Feb 2015 with 166,366 units from 115,913 units in the year-ago period.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.