Halves Greater Noida output to 200/day

Honda Siel Cars India has put on hold "indefinitely" the commissioning of its second manufacturing facility in Rajasthan amid a sales slowdown. The company has already halved production at the existing plant (Greater Noida) to 200 cars a day on a single shift basis against 400 being produced earlier and is using only about 55,000 units of the one lakh unit installed capacity at the site.

No wonder then that work on its Rs 1,000-crore facility coming up at Tapukara has been suspended for now.

Masahiro Takedagawa, president and chief executive officer, said, "The Indian market is still witnessing a downturn. The start of assembly operations in the Rajasthan plant would depend on market conditions. As of now, it has been put off indefinitely."

The sales target for FY09, at 55,000 units is lower than even the 60,000 units Honda Siel sold in the previous fiscal. But this production cutback does not seem to have impacted the launch of the small car 'Jazz', which may still be in the market by mid-year. Honda Siel's hopes may be riding on Jazz for the next few years.

According to vendors, the company's total production schedule for next fiscal is around 70,000 units. "Trial production for the 'Jazz' is slated to begin in April and 23 units would be produced initially. The next month, production would go up to 123 units before expanding exponentially to about 2,000 cars a month from June," said a key supplier to Honda Siel. From all available indications, the company may be looking at sales of 22,000-23,000 units of Jazz, 3,000 units of Accord, 5,000 units of Civic and 40,000 units of its flagship City in 2009-10.

But Takedagawa said Jazz sales would be 15,000 units in the first 12 months after launch. The 1.2-litre Jazz will be produced at its Greater Noida facility and will be the smallest car in Honda's global product portfolio.

Sindhu Bhattacharya/ DNA-Daily News & Analysis Source: 3D Syndication