Honda arm to set up second India unit

Honda Siel Cars India is seriously considering Tamil Nadu and three other states for setting up its second India manufacturing facility, which will be producing small cars.

The Indian arm of Honda Motor Corporation, is keen on launching a premium hatchback positioned in the B+ segment, said Jnaneswar Sen, senior general manager - marketing, Honda Siel Cars India.

It will be a brand new car and will not be based on existing models; it will be made with inputs from the Indian market.

The firm is presently looking at Maharashtra, Tamil Nadu, Rajasthan and Uttar Pradesh to locate its second plant, which will initially have the capacity to produce 50,000 small cars annually.

The plant will be designed for capacity scale-ups in tune with market demand.

The second plant will focus on meeting domestic requirements. The company will zero in on a location in one of the four states based on the availability of logistical support and labour force and presence of ancillary units, Sen said.

While he declined to divulge details on the investment and the period of launch, he hinted that the company would take a decision on its second plant by the end of the current financial year.

The company is also doubling production capacity, involving an investment of Rs 400 crore (Rs 4 billion), from the current 50,000 units to 1,00,000 units a year by the end of 2007 at its existing Noida plant, which will manufacture its City, Accord and Civic models.

It recently launched CR-V, a premium sport utility vehicle imported from Japan for sale in India.

In 2005-06, Honda Siel sold 42,727 units in India - a growth of 14 per cent over the previous financial year. Its flagship model, the Honda City, accounted for 37,545 units.

The total sales of Accord and CR-V (old version) models for 2005-06 stood at 3,324 and 1,858 units respectively. The company is targeting an overall growth of 44 per cent in the current financial year.

India's domestic passenger car market has demand of about a million units annually. Small cars dominate the market with a share of about 70 per cent.

As per industry reports the passenger car market in India will double by 2010 and likely cross 3.5 million units by 2015.