Honda's India unit to invest $280 mln to boost two-wheeler production

By Aditi Shah

NEW DELHI (Reuters) - The Indian arm of Japanese automaker Honda Motor Co plans to invest 17.75 billion rupees ($280 million) this financial year to bolster its two-wheeler operations, a top company official said on Wednesday.

Honda Motorcycle & Scooter India (HMSI) will invest the money in expanding and upgrading its production capacity and launching new products to meet growing demand for two-wheelers, president and chief executive officer Keita Muramatsu said.

Constrained by capacity, India's second-largest two-wheeler manufacturer expects sales growth to slow to 5 percent this financial year, which started on April 1, from more than 20 percent last fiscal year.

Honda expects to sell 4.7 million two-wheelers in India and neighbouring countries this fiscal year, Muramatsu told Reuters, adding it could have sold 5.2 million if not for the capacity constraints.

The company has three plants in India, one of its fastest growing markets, with total annual production capacity of 4.6 million units.

This is expected to initially rise by about 100,000 units once it opens its fourth plant in January. The plant, in the western state of Gujarat, will be able to produce 1.2 million units when it is fully operational.

Muramatsu said the company would also invest in making its plants more flexible so it could easily shift between producing motorcycles and scooters depending on demand in Asia's third-largest economy.

($1 = 63.4600 Indian rupees)

(Editing by Sumeet Chatterjee and Mark Potter)