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Honda Siel puts off Rajasthan expansion plan

BS Reporter  |  Mumbai 

Honda Siel Cars India (HSCI), the Indian subsidiary of the Japanese giant Honda Motor Co, today said that it will postpone the capacity enhancement and assembly operations at its new plant in Rajasthan due to weak domestic demand for cars.

"Capacity addition, initially scheduled for the fourth quarter of the current financial year, has been deferred in view of the economic slowdown, which has impacted the automobile industry, resulting in a drop in demand. Honda will continue to assess the market situation to decide on the timing of the car rollout," stated a company release. The Rajasthan unit of HSCI, spread over an area of 600 acres, has an initial capacity of 60,000 units annually and will see an investment of Rs 1,000 crore.

The deferment was announced at a press conference in Japan addressed by Takeo Fukui, president and CEO, Honda Motor Co. He also talked about various swift and flexible measures taken by the company to counter the sudden and expansive weakening of the marketplace in all business areas.

HSCI has also decided to reduce production at its primary plant in Greater Noida, Uttar Pradesh, in an effort of maintaining lean operations. "HSCI is closely monitoring the market situation and will adjust monthly production volumes to respond promptly to market demands, while ensuring operational efficiencies and low inventory levels," added the release.

Recently, the Nissan-Renault joint venture, based in Chennai, also changed its plans by deferring the launch of a second assembly line, which is in the wake of deteriorating demand for cars.

Despite a solid dip in demand for cars in the domestic market, HSCI has decided to go ahead with its plans of launching the premium hatchback Jazz by mid-2009. The company has seen sales grow by 15 per cent in November, aided by strong pull for the new City and Accord models.

Just weeks earlier, Nissan-Renault had said that due to the ongoing turmoil in the automotive sector, the company will initiate a 'temporary realignment' in Indian operations. It will now put up one assembly line instead of two at the plant, which will begin operations by mid-2010.

However, an official from Renault said that there was no plan to change the investment amount of Rs 4,500 crore earmarked for the country for the next seven years. There will also be no change in the aggregate output figure of the plant, which stands at 400,000 units.

First Published: Thu, December 18 2008. 00:00 IST