Honda drafts script for Rajasthan plant

“Honda’s philosophy is to produce in markets where our products are sold. The model we are going to make in India will primarily be for the domestic market,” chairman, Honda Motors, Satoshi Aoki told reporters at the foundation stone laying ceremony of the Japanese auto major’s second plant in India.

Honda Siel Cars India (HSCI) is setting up its new facility on 600 acres in Alwar, Rajasthan. It is initially investing Rs 1,000 crore to make 60,000 vehicles, not confined to the small car alone but also some of its other existing models at a 350-acre unit. Production will later be scaled up to 2-2.5 lakh vehicles annually. first roll out in 2009. Honda will also house its 100-acre R&D centre and a 150-acre ancillary unit on this area. The new facility will start manufacturing components by the end of 2008 and the first car will roll out in 2009. It will employ 1,000 people in the first phase of commencement.

Interestingly, managing director of Rajasthan Industrial Development & Industrial Corporation (RIICO), Kuldeep Ranka told reporters that Honda would invest Rs 5,000 crore, adding that the contribution from its vendors would be to the tune of Rs 2,800 crore. “We are investing Rs 1,000 crore in our second facility and do not have plans to pour any more money,” replied president, HSCI, Masahiro Takedagawa when asked about Honda’s investments.

He also refused to name specific vendors who would be supplying parts to the new small car, which aims to have a localisation content of 90 percent (for the record, it is 80 and 78 percent for the City and Civic respectively). Honda’s new model will come under the definition of the small car category which is a four metre long vehicle with engine capacities of 1200cc for petrol and 1500cc for diesel. It also means that it can benefit the lower 16 percent excise duty.

COMPONENT EXPORTS

Takedagawa added that Honda may export components. “We are exploring making parts in India for export. Indian or Indo-Japanese JVs can do this,” he said. It is likely that these components could be exported to Southeast Asia, particularly Thailand that is due to sign a free trade agreement with India by the year’s end. For the moment, Honda imports parts from Thailand but the converse does not happen.

The company hopes all this will change when a final agreement on the FTA will come into effect. “The components business needs volumes and the idea is to make some parts in specific markets and exchange them with others. We have already established an exchange network among Asean. Not only an FTA with Thailand, but even an Indo-Asean FTA will benefit us,” Takedagawa said.

AMMAR MASTER