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Honda Keen on Maintaining Top Position in Market, to Open Second Plant in India Tomorrow

Honda Motor Company’s CEO, Takanobu Ito, will soon be present during the inauguration of their new two-wheeler plant, tomorrow in Rajasthan, in spite of having a busy schedule. This can be seen as the increasing importance of the two wheeler market in India for Honda. Their separation from long time JV partner, Hero Group, resulted in the company losing around five million annual bike sales to their former ally.

The company is now quickly trying to decrease this deficit, which would explain the company getting ready to open their second plant, and already announcing their plan to launch their third plant in Karnataka.

The presence of the CEO of the company, is therefore not just incidental. He had said a year back, that emerging countries like India were strategic in redesigning the future of the company. He had said that their main competitors in this market were Indian and Chinese two wheeler manufacturers.

If Honda plans to maintain its leading position in this market, they will not only have to provide high quality and attractive products, but improve their cost competitiveness as well, so that they are on par with their competitors. Honda Motorcycle and Scooter India will therefore be focusing on the commuter bike division that account for sales of more than four lakh bikes per month.

Of this, TVS Motors manages to sell around 2.5mn, with HSMI selling around 2.2mn units. Once HMSI double’s the production capacity at their Rajasthan plant to 1.2mn, their overall output will increase to around 2.8mn units in 2012-13. The third Karnataka based plant will take their overall output to around 3.5mn units by financial year 2014, before reaching production of 4mn scooters and bikes in 2014-15.

After this stage, Honda is expected to rev up, which would result in fascinating dynamics in leadership stakes of the two wheeler segment. India could end up as the Japanese auto company’s highest selling two wheeler market in the coming five years, ahead of Vietnam and Indonesia.

Honda however is not that positive in its outlook regarding the Chinese market, because the prevalent low cost structure in China could be a challenge for the company. They believe that their Indian customers have better appreciation of quality and would as a result pay more for it. As a result there would be more initiative in terms of R&D, with most of the important work taking place in India.

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