Panaji : Country’s second largest two-wheeler player Honda Motorcycle and Scooter India (HMSI) is advancing the commissioning of its fourth plant with 1.2-million capacity near Ahmedabad by two months to January-end to meet rising demand for its scooters.
“Our existing three plants are running at 100 per cent capacity as demand is rising faster than what we can offer.
We still have around six-month waiting period for Activa.
“So we will be commissioning the Rs 1,100-crore scooters-only plant in Gujarat by the end of next month instead of the earlier plan of end-March,” HMSI President and Chief Executive Keita Muramatsu told PTI on the sidelines of launching the country’s first BS-IV-compliant biking model CB Hornet 160R here.
“This scooters-only plant at Vithalapur near Ahmedabad is the world’s largest plant for any scooter maker,” Muramatsu said, adding this will take the company’s overall capacity to 5.8 million from the present 4.6 million.
HMSI started operations in 2001 with its first 1.65 million units plant at Manesar in Haryana.
In 2011, it launched the second plant at Tapukara in Rajasthan with 1.2 million units capacity.
It again ramped up production by investing in a third plant at Narsapura in Karnataka in 2013 with 1.8 million units of capacity, making it Honda’s largest two-wheeler plant in the world.
All three plants are currently running on full capacity and it still has a six-months booking period for Activa brand of scooters, which is it bread-and-butter brand, HMSI Senior Vice President – Sales and Marketing, Yadvinder Singh Guleria said.
He added that as demand grows, the company will have to look for another greenfield plant as only the Karnataka factory has land available for brownfield expansion.
When asked if it will follow carmakers like Maruti, Toyota and GM in increasing prices to the tune of 3 per cent, the company said it has no plans because it can still absorb the marginal increase in input cost following the depreciation of the rupee, as it still imports some electrical parts. On an average, the company sources 90 per cent of its parts locally, Guleria said.
Muramatsu said by the next year, India will be the largest market for its parent Honda globally.
Currently, with 4.65 million units, Indonesia is the largest market, while the Indian market is worth 4.60 million units now.
HMSI is the leader in the scooter segment, which contributes over 62 per cent of its 4.6 million annual sales now.
It hopes to increase its bikes’ share by two percentage points to 40 per cent next year or so, as the company hopes to produce more bikes from its existing plants after the Gujarat plant gets commissioned, Guleria said.
During the last festive season, it sold 68 per cent more bikes and scooters to cross 0.5 million-mark in November, of which over 2.2 lakh units of sales came on Dhanteras festival.
The company since its entry has invested over Rs 7,800 crore, and employs around 20,000 people, including the 3,000 people hired at the upcoming Gujarat plant.
The company, which recorded over Rs 17,000 crore worth of sales in FY15, is expected to close the fiscal year with over Rs 19,000 crore turnover, making it one of the largest MNCs in the country.
The domestic two-wheeler market is on course to touch the 20 million mark by 2020 from 16 million in FY15, but the industry is worried about the new emission and safety norms.
While HMSI has been growing at a much faster rate of 3 per cent than the industry’s flat growth till November, Muramatsu refused to project a market size for the company, saying the forthcoming stringent emission norms and safety measures would be highly disruptive.
“The new emission norms and safety features will be very disruptive. How the industry will fare is to be looked at. While ABS on all 125-cc bikes and above capacity will ramp up cost and thus put pressure on affordability, the new emission norms are highly challenging as we don’t know whether the industry will be able to meet them,” Muramatsu said.
Guleria added, “An ABS alone will push up the price by over Rs 10,000 per unit, while CBS on sub-125-cc bikes and scooters will also increase the price, pushing the overall cost up. Similarly, the all-time beaming headlights will also push up cost.”
The government mandates the new emission norms and safety features from 2017 through 2019.
When asked whether the company is happy with the performance of its bike business, Muramatsu said, “I am very happy with the bike performance, though we are yet to make a good impact with the youth and our bike sales have been falling, albeit at much slower pace than the industry, which has been falling steeply.”
“We hope the new CB Hornet 160R will be a big hit with the youth,” Muramatsu said.
Over the years, HMSI has aggressively ramped up its network and has doubled it in the past two years alone from 1,950 outlets in FY13 to 3,750 outlets in FY15.
The company plans to add 800 new touch-points in the current fiscal. It has already reached 4,250 outlets, with 11 zonal offices.