Honda writes new scooter script

Honda’s inaugural of its second scooter assembly line in Gujarat on Wednesday coincided with Cabinet approving a pay hike for Central Government employees.

The announcement could not have come at a more appropriate time for the Japanese automaker which will now go all out to increase its overall sales with the Activa leading the way. In all fairness, this will extend to other two-wheeler makers who will tap a host of new buyers in cities and town who now have more money in their hands.

Increased production

From Honda’s point of view, the second assembly line will soon result in one lakh scooters rolling out of the Gujarat plant every month by end-October. In the process, it will hopefully put an end to the waiting list for the Activa which averages a fortnight across most parts of the country. Honda’s overall two-wheeler capacity now stands at 5.8 million units across its facilities in Haryana, Rajasthan, Karnataka and now Gujarat.

It will also be interesting to see if the commissioning of its latest plant will continue to drive scooter numbers to the point where motorcycles begin feeling the heat. At present, the Activa is the top-selling brand in two-wheelers and has consistently overtaken Hero’s Splendor in recent months. Nationwide, motorcycle sales are still ahead of scooters but there is no question that the gap is rapidly getting bridged.

Today, scooters account for a third of total two-wheeler sales and some auto sector experts reckon that it is only a matter of time before they surge ahead of motorcycles. Not everyone concurs with this view, however, and say that the recent setbacks in rural India following two successive drought years impacted motorcycle numbers.

This could change now with the monsoons on schedule and the mood within industry turning a lot more buoyant as a result. The pay hikes for Government staff will also have a spin-off on bike sales and this is where the acid test truly begins.

Ideally, Honda would like to have its motorcycle business keep pace with scooters but will not complain too much if Activa numbers keep increasing in the coming months. The following fiscal will see the company increase capacity at its Karnataka facility by six lakh units which will eventually see 2.4 million bikes and scooter produced annually from a single location.

Honda has been on a relentless expansion spree since the time it called it quits with Hero over five years ago. At that point in time, it was operating out of the Haryana plant and producing 1.6 million scooters annually. By the end of 2017-18, its overall capacity will be substantially higher at 6.4 million units.

Such a rapid pace of growth comes with its own set of challenges especially when it means creating a vendor cluster and planning for logistics. In addition, there could be HR-related issues when dealing with a large and diversified workforce.

In this backdrop, it will be interesting to see if Honda continues its aggressive stance with at least one more plant added to its India kitty by the end of this decade. If this were to happen, the single biggest motivator would be its quest to be Number 1 in the market even while its former ally, Hero, is clearly in no mood to give the mantle up in a hurry.

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