Honda may begin two-wheeler production at Gujarat plant's third line in 3 years

Japanese auto major Honda's Indian two-wheeler arm could take around two-three years to start production on the third line of its Gujarat plant, as demand has shrunk in the wake of coronavirus pandemic, according to a senior company official.

Honda Motorcycle & Scooter India Pvt Ltd (HMSI) had gone ahead with the construction of a third line to add 6 lakh units per annum at the Gujarat plant, having a total capacity of 12 lakh units per annum.

"As for our new line which we had made in our fourth factory in Gujarat, we call it our third line. The construction activity and other activities went on as per schedule. However, we have put on hold the decision on when to start production at that line because the overall market has shrunk.

"In terms of demand, the existing lines and existing capacity are good enough to take care of the demand, which is currently in the market and in the coming next two years or so," HMSI Director - Sales & Marketing - Yadvinder Singh Guleria told PTI.

At present, HMSI has four manufacturing plants in India located at Manesar (Haryana), Tapukara (Rajasthan), Narsapura (Karnataka) and Vithalapur (Gujarat) with a total annual production capacity of 64 lakh units.

When asked by when the company is likely to take a call on starting production on the third line in Gujarat plant, Guleria said, "It depends on how quickly the market rebounds and the new demand shoots, green shoots visible to us. That is the only time we will decide to start production in the third line... From today's point of view, since the overall market condition is very fluid and a lot of unpredictability around, it looks like two to three years".

Guleria said while the two-wheeler industry has been hit hard by the coronavirus pandemic, HMSI has had its own challenges considering the fact that scooter sales happen mainly in urban India, which had been in the lockdown for a considerable number of days compared to rural India, where mainly motorcycles that too entry-level models are high.

"In terms of our product mix, we are basically selling 60-65 per cent our scooters and the rest of the business is coming from our motorcycle business. This was another challenge for us because urban India took more time to open (from lockdown). That is also reflected in our figures since our major business is coming from scooters, they were impacted more," he said.

Although the overall industry number is down 25 per cent, the motorcycle is down 22 per cent, and scooters are the ones that had negative growth of 33 per cent, he said, adding "so that also impacted HMSI overall. Against the drop of 25 per cent for the industry, HMSI drop was more than 30 per cent. That was basically because of our product mix and our dependence on urban India, which was under lockdown (longer)".

Amid challenges of the pandemic, HMSI has last week initiated a VRS scheme for permanent workers as a part of Honda's overall production realignment strategy across all four factories to improve its operational efficiency with the objective of ensuring long-term business sustainability.