Amazed by stellar show, Honda weighing third car plant in India for entry-level small car

Oct 04 2013, 12:22 IST
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Honda's 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. Honda's 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.
SummaryUnit, likely in Sanand, to cater to new small car in R3-4 L bracket as co fine-tunes strategy

the volume car market and competing with Maruti Suzuki and Hyundai for the first time. For such volumes, they will need a new plant, or an extra line," said Gaurav Vangaal, senior analyst, automotive forcasting, at IHS Global.

The development comes on the back of an aggressive growth target set by the company. Honda is targeting a market share close to 10% with four new models planned for launch by 2015-16 — a new City, new Jazz, completely new compact MPV on the Brio platform and a small SUV based on the Jazz. With volumes up 65% to 49,263 units in April-August this year on the back of strong demand for the Amaze, Honda's market share in the PV segment has almost doubled to 5% from 2.73% in FY13. Currently, Maruti leads with a 40% share of PV sales, followed by Hyundai (15%) and Mahindra (10.6%).

Honda global chairman Ike recently told FE in an interview that expansion at Tapukara beyond the current plans would prove tough, but the company is looking at other regions within the Delhi-Mumbai Industrial Corridor. “We are very much interested in DMIC, but we need infrastructure. There are some bottlenecks in terms of infrastructure. For example, if we want to expand our volumes in Tapukara (existing two-wheeler and upcoming car plant), we cannot, because of limited supply of water. So we have to find another place. There are problems in logistics. So, even if expand capacities to meet the demand, the problem is how to deliver these vehicles to people in time,” he said.

Sources said Sanand could be the most likely site for this third plant as Honda's domestic two-wheeler arm, Honda Motorcycle & Scooter India, has already bought a plot of land in the region for its own facility. This is because Honda follows a strategy of keeping group affiliates close by. For example, in Tapukara, where a car plant is expected to start next year, the two-wheeler arm already runs

a plant.

This development comes soon after Honda announced (in April this year) an investment of R2,500 crore for the second car plant at Tapukara with a 1.2-lakh unit initial annual capacity, apart from a forgings unit and diesel engine plant at the same site. Currently, the company operates a single car plant in Greater Noida with annual output of over 1.2 lakh units. The plant makes the Brio, Amaze, City models and assembles the CR-V

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