INDIA BUSINESS WORLD - OCTOBER 2005
THE MONTH THAT WAS

HONDA LINES UP RS 400 CR FOR EXPANSION

Setting aside setbacks from labour unrest, including a dip in sales, Honda Motorcycle and Scooters India (HMSI) is chalking out an aggressive expansion plan for its Indian operations. The Japanese major is planning to invest Rs 400 crore at its Manesar plant to triple the production capacity for motorcycles by the end of 2007-08. Post-expansion, HMSI will produce 600,000 motorcycles compared to 200,000 now. Its total two-wheeler capacity will increase to 1.2 million units from eight lakh now.

The capex is part of HMSI's plans to emerge as a massvolume two-wheeler maker with presence in all sub segments of the industry in a stepwise manner. As a first step, the company is working on introducing its next product - a sub-150 cc motorcycle - by the end of the current financial year. The new product will mark HMSI's entry into the volume segment of the motorcycle market. Currently, the company's presence is restricted to the premium segment with its 150-cc Unicorn.

The move will put HMSI in direct competition with existing volume two-wheeler makers, including Hero Honda, Bajaj Auto and TVS Motors, something it has avoided so far by restricting itself first to scooters and then to premium motorcycles. The company, however, discounts this. "We don't compete directly with the existing players as our products are designed to meet specific consumer needs. The market is growing fast and there's enough demand to enable every player to grow," says Mr Naresh K Rattan, assistant general manager, sales & marketing, HMSI.

Honda entered the Indian two-wheeler market four years ago by launching a gearless scooter in July 2001, followed by a geared scooter and then a 150-cc motorcycle.

Beginning this month, Honda also plans to launch fresh variants (read new body graphics and newer colours) of its existing portfolio of scooters and motorcycles. First on the refresh list are variomatic scooters - Activa and Dio. This will be followed by a new-look Unicorn and its 150-cc geared scooter - Eterno.
In the current financial year ending March '06, Honda plans to sell seven lakh two-wheelers, which are targeted to increase to a million units in the next financial year.