HMSI mulls exports from Gujarat plant; expands capacity to 1.2 mn

Two-wheeler major Honda Motorcycle and Scooter India (HMSI), which completed expansion of its scooters-only plant at Gujarat's Vithalapur by 6,00,000 units per annum, is planning to add another 6,00,000 units pa capacity at its Karnataka facility by mid-next year. Further, with expanded capacity now in Gujarat, the company might also look at export prospects from this site post the festival period, around October-November.

This expansion increases HMSI's total annual production capacity to 5.8 million units, including 1.6 million units at first plant (Haryana), 1.2 million units at second plant (Rajasthan), 1.8 million units at third plant (Karnataka) and another 1.2 million units at the fourth plant (Gujarat).

The company is also planning to add another 6,00,000 units at its Karnataka facility by mid next calendar year with an investment of around Rs 500 crore.

Speaking to Business Standard, senior vice-president, sales and marketing of HMSI YS Guleria said that the Gujarat plant is planned for catering to the domestic market. "However, now with the expanded capacity (1.2 million units pa), and given the proximity to ports, we might explore opportunities for exports from this site as well in the future," he said. It would, however, not be before the festive season ends here in India and the demand from the domestic market tapers down.

The capacity addition at Gujarat is also likely to take some load off its other plants — Karnataka, Rajasthan and Haryana — all of which are making scooters. The company has recently doubled the production capacity for Navi at its Tapukara plant as the new vehicle has already seen huge demand. "So far, we have been compromising with the production of one model or the other, given the production constraints. Expansion at Gujarat is likely to offer some breather," Guleria said, adding that all four factories, however, would continue to make scooters.

HMSI ended last fiscal with a 54-55% market share in scooters and a 15% market share in motorcycles. In the first two months of this year, the company has managed to grow its scooters market share to about 58%, while its motorcycle market share has dipped by about 1%. Overall, the two-wheeler market share, however, has improved by around 1% to 27% in April-May compared to the same period last fiscal.

Around 16-17 million two-wheelers were sold in India last year, of which nearly one-third were scooters. The company believes that going forward, increasing scooterisation would take place in the Indian two-wheeler market.

Keita Muramatsu, president and CEO, HMSI, said: "India is not only the world's no. 1 two-wheeler market, but is also going to be the no. 1 contributor to Honda global two-wheeler sales for the first time in this fiscal year 2016-17. Scooterisation, a trend seen earlier in developed markets of the world, is firmly driving the Indian two-wheeler momentum today. The scooter segment is growing at 30%, compared with 15% growth of two-wheeler industry for April-May 2016 on a year-on-year basis."

Around 23 vendors have together invested close to Rs 2,200 crore and generated nearly 9,000 new employment opportunities. Of this, Honda's fourth plant is directly employing close to 3,000 associates and has entailed a total investment of Rs 1,100 crore.