HMSI to Set-up Second Plant in Rajasthan

Recession had bad effects on Honda Motor Company, Japan. Ironically, both of its Indian arms, Hero Honda and HMSI played a prominent role in resurrecting the Japanese automobile giant. The parent company Honda Motor Company, Japan is betting big on its fully owned subsidiary Honda Motorcycle and Scooter in India (HMSI). And why not, since its first launch, it has always seen an upward swing.

HMSI is currently the dominant player in the scooter market and is focused on setting its footprints deep in the motorcycle market as well and the launch of a volume based 110cc Twister is a testimony towards the same endeavor.

HMSI has plans to sell 1.25 million units in the current fiscal (2009-10) and further increase the figure to 1.5 million two wheelers in the next fiscal (2010-11). The launch of the volume driven smaller capacity commuter bike, Twister was in line with the same targets and HMSI expects to sell 2,20,000 units of the same bike. Honda currently has a single plant in India which is located at Manesar in Haryana which has a capacity of producing 1.5 million units per year which HMSI plans to ramp up to 1.6 million units by next year. Due to the same production constraints HMSI has announced to set up another plant in the country to manage its future prospects smoothly. This intent is further strengthened by the recent labor spurt which costed the company a wholesome loss in the range of 300 crores. Back down the memory lane in 2005 also, the firm had faced similar issues which turned violent and tarnished the image of the company.

HMSI is in the process of acquiring 6 acres of land in the Alwar district of Rajasthan which is only 40 kilometers from its current production plant in Gurgaon and has already got clearance from the state government. According to the company’s estimates, the new plant would get an initial investment of Rs 500 crores and would go operational during the second half of 2011 with a production capacity of 6,00,000 units per year ensuring HMSIs annual production capacity increases to 2.2 million units. HMSI also has plans to enhance its capacity to 12 lakh two wheelers per annum in a span of 5 years with an additional investment of Rs 600 crores spread over different phases.

The various offers given to the company by the government of Rajasthan includes land at concessional rates, cash subsidy on VAT, 50 percent subsidy on stamp duty, 50 percent concession on electricity duty and special rate of 0.05 percent on central sales tax. Presence of their own Honda Siel car plant nearby also comforted the company for the same venue. With record 11 percent increase in sales during 2009 to 1.1 million units and considering the fact that the company exports scooters and motorcycles to 35 different countries, a second plant was the inevitable solution to cater to the growing demands for Honda products.

– Saad Khan