Honda 2W weighs capacity expansion beyond planned 8 million units

HMSI is assessing whether to add a production line or set up another factory as domestic demand and exports grow, with existing expansion plans set to lift capacity to 8 million units

Honda Motorcycle & Scooter India (HMSI) is considering expanding its annual production capacity beyond the 8 million units planned by 2028, as strong domestic demand and export opportunities continue to rise rapidly, said Tsutsumu Otani, president and chief executive officer of the company, on Sunday. 

“In the near future, the capacity of 8 million may not be enough,” Otani told Business Standard in an interview. The company is studying whether to add another production line at an existing plant or set up an additional factory, he said, adding that no decision had been made on the form of the expansion. 

The proposed expansion would come on top of HMSI’s existing plans to raise its annual capacity from 6.25 million units currently to around 8 million by 2028. The company is setting up a fourth production line at its Vithalapur plant in Gujarat, scheduled to begin operations in 2027, and a third line at its Tapukara plant in Rajasthan, scheduled for 2028. These projects are expected to take overall capacity to around 7 million units in 2027 and 8 million by 2028. 

“We have to consider expanding further. We are studying whether to add an additional factory or an additional line. That has not been decided,” he said. Otani said the company was assessing future capacity requirements in view of growth in both the "domestic market" and "exports".  

HMSI expects India’s two-wheeler market to reach 22-23 million units in the current financial year, based on the volume sales pace so far. The company expects to sell more than 6 million units during the year, Otani said. India’s domestic two-wheeler sales rose 10.7 per cent year-on-year to 21.71 million units in FY26, while HMSI’s domestic sales increased 7.9 per cent to 5.75 million units in the last financial year. 

Demand during the ongoing festival season has also been strong, with sales momentum picking up around Navratri. However, the company was not yet able to provide a precise assessment of festival-season sales, Otani said. 

Dealer inventory is generally around two months of sales, although stock levels vary by model. Some models are performing better than expected, leaving inventory slightly below the level needed to meet demand, while dealers have sufficient stock overall, he said. 

Exports are another source of demand for the company. HMSI expects exports to grow by around 30 per cent in the current financial year compared with the previous year, Otani said. The company sees opportunities to increase shipments to markets in Latin America and the Middle East. 

However, production capacity is already committed and domestic demand is growing strongly, limiting how much the company can expand exports in the near term, he said. 

Beyond manufacturing, Otani said the company’s product strategy would continue to respond to changing customer preferences. Buyers include first-time purchasers, existing motorcycle owners looking to upgrade to higher engine-displacement models, and car owners seeking convenient mobility in cities. Younger customers are also increasingly comparing global models online and looking for different designs, he said. 

On flex-fuel vehicles, Otani said Honda already had the engineering technology and experience from markets such as Brazil, but the timing of any wider rollout in India would depend on government policy, fuel availability, pricing and customer demand.

“Customers will choose the energy option that best suits them, whether electric, flex fuel or conventional petrol,” he said. Honda could expand its flex-fuel line-up gradually as the market develops, he added. 

Otani said the approach could differ by state, depending on local policies, the availability of fuel and the types of vehicles customers prefer. Uttar Pradesh, for example, could require a different product strategy from southern markets where scooters have a stronger presence. Incentives could also support flex-fuel adoption, although the framework would be for the government to decide. 

The company is also facing higher costs amid the West Asia conflict. Otani said the priority was to manage the increases and that Honda was absorbing some of the additional costs rather than passing the entire burden on to customers. The cost outlook for the next six months remained difficult to predict, he said, because the geopolitical situation was changing constantly.Asked about plans to introduce electric motorcycles, Otani said scooters were currently a more natural fit for electrification. Converting a motorcycle to electric requires changes not only to the powertrain but also to the frame and styling, while meeting customers’ existing usage patterns and expectations. 

Premium motorcycle buyers also value engine sound and riding feel, he said, making it difficult for electric models to replicate the experience they expect. 

Otani said the company’s focus was on increasing the number of Honda vehicles in operation in India and retaining existing customers, rather than pursuing market share alone. Customers continuing to use Honda vehicles and choosing the brand again when replacing them were important measures of long-term business growth, he said.