Since the time it parted ways with Hero in December 2010, Honda has been on a relentless capacity expansion spree.
What began with 1.6 million units from a single facility at Manesar, Haryana, has now grown four-fold over the last six years. Today, Honda has a plant in Karnataka that produces 2.4 million two-wheelers with Rajasthan and Gujarat at 1.2 million units each. With Manesar’s 1.6 million, this adds up to an impressive 6.4 million scooters and motorcycles.
Earlier this week, Honda indicated that it was looking at setting up a fifth plant, which in all likelihood could be commissioned after 2020, when Bharat Stage VI emission norms become a reality. Eventually, the go-ahead will need to come from headquarters in Japan, which means another 1.2 million units (at least) going by the expansion pattern at its other facilities.
The Japanese automaker’s erstwhile ally, Hero, continues to hold on to its top slot and is a million units ahead annually, though the gap between the two has been narrowing down in recent times. This also has to do with the fact that Honda truly ignited the scooter movement in India with its Activa.
Today, scooters account for a third of two-wheeler sales and the Activa has also emerged the top-selling brand. The key question now is when and if the change in leadership equations will happen and see Honda possibly emerge the number one player in India.
Company officials are confident that the BS VI transition will be an important inflection point where its expertise in fuel injection technology combined with the benefits of large volumes will make a big difference. This is when Honda believes that customers will realise what it takes to offer new technology at an affordable price, a strength that will keep it ahead of competition.
If all these projections fall into place, the company will be poised to overtake Hero by 2021, though the Indian company has not been sitting quiet either. During the years of a solo ride sans Honda, Hero has held its own comfortably thanks to the good showing of its Splendor brand as well as the entry-level HF series.
Like Honda, it has also announced its intent to expand capacity, which will be from a new plant in Sri City, Andhra Pradesh. Honda, of course, is betting big on the BS VI regime to tilt the see-saw in its favour and it will be interesting to see how the tug-of-war pans out in the coming years.
Plant location possibilities
And where will Honda look at establishing its fifth plant? Given that it will now look at enhancing its global business out of India, this would naturally mean that it would have to be close to a port. In that case, AP and Telangana may emerge top favourites along with Tamil Nadu and the Pune belt in Maharashtra.
Perhaps, a state like Odisha could also be a likely candidate since the Paradip port can take care of overseas shipments while offering greater proximity to markets in the East and Northeast. However, the absence of a well-developed supplier base in this region may be a handicap quite unlike the West and South.
Managing so many plants is not an easy task and Honda has handled it well so far since it called it quits with Hero. The Karnataka two-wheeler facility is its world’s largest and its capacity was increased in phases in record time. All this reflects an aggression to stay ahead of the curve and this will gain further momentum when HQ gives its go-ahead for the fifth plant.
In contrast, its other Japanese two-wheeler counterparts in India have been on a slow-and-steady curve. Suzuki crossed 5,00,000 units in sales last fiscal and is looking at a million units by 2020, by which time it will have started work on its second plant, tipped to be a choice between AP and Telangana.
Yamaha is inching towards a million units from two plants in Chennai and Surajpur (UP). It is also looking at servicing the African market aggressively from India with entry-level motorcycles like the Saluto that are produced in Chennai. Kawasaki, now on its own without Bajaj Auto, is a marginal player in powerful bikes, which means volumes will be slow. Till then, it looks Honda all the way.