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Honda to sign deal with Gujarat govt for unit

Business Standard:  June, 2014

Ahmedabad: While the proposed project in Gujarat of the country's largest car maker, Maruti Suzuki, seems to have hit a minor block as reported, another Japanese automotive company, two-wheeler maker Honda Motorcycle and Scooter India (HMSI), is set to soon sign the State Support Agreement (SSA) with the administration here.

A senior state government official said, "The project proposal will soon be moved to the state cabinet, after which the formal SSA could be signed in around a month. The chief secretary has already approved the company's proposal."

HMSI is learnt to have bought around 200 acres of private land at Vithlapur in the Mandal region of this district at Rs 15-20 lakh an acre to set up its fourth manufacturing unit in the country. The company could not be reached for a comment.

The parent group's passenger car outfit, Honda Cars India Ltd (HCIL), is also scouting for land in the same region. Government sources claim the car-maker requires around 250 acres and is hoping to buy privately.

Senior HMSI officials had visited Gandhinagar last November to finalise details on the SSA. The company intends to invest about Rs 1,000 crore on the Gujarat project. The state government offers certain standard incentives for all projects entailing an investment of at least Rs 1,000 crore, such as value-added-tax refunds and waivers on stamp duty and registration fee.

The two-wheeler maker aims to sell 4.5 million units in FY15, up from the 3.72 mn sold in 2013-14, mainly on the back of two new motorcycles expected to be launched later this year, and its recently launched scooter, the Activa 125.

The company currently has three manufacturing facilities in the country, one at Manesar in Haryana (1.6 mn units annual capacity), another at Tapukara in Rajasthan (1.2 mn units annually) and the third at Narsapura in Karnataka (1.2 mn). HMSI is adding another 600,000 units at the Karnataka plant, taking its capacity to 1.8 mn annually. With this expansion, the cumulative annual production capacity would be around 4.6 mn units.

Vithlapur is only a few kilometres away from the site of Maruti Suzuki's proposed plant, at Hansalpur in the Mandal region. Maruti Suzuki has also bought a land parcel at Vithlapur for future expansion. The area is around 110 km from this city, between Sanand on one side and Mehsana town on the other.