Though the domestic car market is witnessing a slowdown, Honda is betting big on growth from India, encouraged by the success of its first diesel model, the Amaze entry sedan. The Japanese carmaker has started a feasibility study for building a third plant and is considering Gujarat (Sanand) as a base, even before its second new plant in Tapukara, Rajasthan, begins production by early-2014, multiple sources told FE.
These plans were reportedly discussed at a top-level meeting in New Delhi last month, where Honda Motor Company global chairman Fumihiko Ike and global president Takanobu Ito were present.
This new third plant is expected to cater to an all-new model, a new entry-level small car in the Rs 3-4 lakh range positioned below its current entry model Brio (starts at R4.13 lakh). The new small car will target high monthly volumes, competing with Hyundai Santro and Eon, and market leader Maruti Suzuki's Alto, the largest-selling car in India with monthly volumes of about 20,000 units.
“Last month, Honda's global meet was held in India with a focus on gaining share in the country's car market. A feasibility study has been started for a new plant, for which several locations are being considered. This plant will make a new car below the Brio by 2017, called the World A-entry hatch,” a source close to the development said.
Honda is looking at a new plant as the new small car will target the high-volume belly of the Indian market — the mini car segment that currently accounts for 23% of passenger vehicle (PV) sales and 32% of passenger car sales. The mini segment saw 11.21% growth in April-August FY14 at 2.22 lakh units, even though total PV sales fell 5.30% to 9.84 lakh units in the period.
“We have to run fast to get volumes in India because we are very small today. Honda feels that to maintain and grow its global market share by 2020, increased capacity will be needed in emerging markets like India, from where the growth will actually come, since developed markets are near saturation. Talks are on for various products, but nothing has been frozen. But only when we are sure of utilising the new capacity at Tapukara, can we ask the headquarters for more investment,” a Honda Car India official said.
"This is a very key pillar of Honda's new growth strategy. With such a move, Honda will be going for