Honda to make Indian unit hub for 2-wheeler global market

Honda Motor Company of Japan has chosen India in preference to China to build a hub for its global two-wheeler business. Honda Motorcycle and Scooter India, the wholly-owned subsidiary of the $45.5 billion Japanese auto major, which has just received clearance from the Foreign Investments Promotion Board, will be the vehicle for the global two-wheeler thrust of the company.

Projected to be fully operational by the second half of year 2001, the company intends to sell some 6 lakh vehicles in the first five years. The Japanese parent proposes to invest Rs 183 crore in the subsidiary. Its plant will be located near New Delhi.

The Indian venture's product range will be scooters, motorcycles and components, four-stroke engines for two-wheelers and three-wheelers, and their components. The company plans to operate at a level of 1 lakh vehicles a year when it launches production in 2001, and increase it to 2 lakh vehicles a year by 2004. It proposes to generate export revenue worth $18 million in the first five years of operations. The subsidiary is expected to pay a technology fee to its Japanese parent.

At present, Honda has two joint ventures in the Indian automotive industry -- Hero Honda, with the Munjals of Punjab, for making Hero Honda motor cycles, in which it has a 23 per cent stake, and Honda Siel Cars India, with the Sri Ram group, which makes Honda City cars, and in which Honda holds a majority stake. Under an agreement with the Munjals of the Hero group, Honda is not permitted to manufacture motorcycles till the year 2004.

Honda had yet another collaborative venture in India, Kinetic Honda, a joint venture with Kinetic Engineering of the Firodias, where the Japanese company has divested its holding in favour of Kinetic Engineering.

Honda has given an assurance to the FIPB that it will provide all technological assistance to both Hero Honda and Kinetic Honda. It has also clarified that the subsidiary is not conceived as a competitive but as a complementary operations in relation to the joint ventures.