Honda stares at plant closure as India sales fall 50% in 4 years

MUMBAI: With sales volume dropping almost by half over the past four years, Honda Cars India is considering to restructure its manufacturing operations and cut cost, which may mean closing down one of its two units.With annual plans likely to drop to almost 1 lakh units in FY20, Honda Cars India may move production from Greater Noida to the Rajasthan plant and sell the land acquired in Gujarat a few years back, said five people familiar with the company’s plans.The Greater Noida facility — its first manufacturing base in India — may turn into a R&D hub and small CKD operation units at best from the buzzing manufacturing operation it used to be almost a decade back, if the plan goes through. The production at the Greater Noida plant, which has an annual capacity of 1.2 lakh units, has come down to almost 2500 units month -- i.e., capacity utilisation of less than 20%-30%. And even cumulative production capacity is expected to drop to as low as 40%.71750203 The feasibility study of recasting the manufacturing process is happening at a time when the Indian market is staring at its steepest decline in passenger vehicles sales in the past two decades.“With over a couple of decades presence in the state, Honda cannot claim tax benefits anymore and where the plant is located is also becoming a residential town. The option to move manufacturing to Tapukara has been going on for the past two years; it is not a question of ‘if ’, but a question of ‘when and how’ – that’s what the management has been vigorously studying,” said a person on the condition of anonymity.Honda had invested in Gujarat and Rajasthan between 2010 and 2015, expecting a strong growth, but the market has actually grown by merely 4-5% compounded on an annual basis in the past five years. The company has slowed down on dealership expansion, and even the investment on new customer interface, which it was supposed to roll out over the past couple of years, will be deferred.The new-generation City has been largely moved to Tapukara plant and the production in Greater Noida has come down to just 60 units a day and that too mostly completely knocked down (CKD) units.

from Economic Times https://ift.tt/2BIEGZ4