Honda Motor Co., Japan's second-biggest carmaker, will start making its first small car model in India in 2009 to enter a segment that comprises three-quarters of all cars sold in the South Asian country.
The new car will be produced at a new factory in the western state of Rajasthan, Masahiro Takedagawa, chief executive officer of the local unit Honda Siel Cars India Ltd., said in an interview in the state's capital Jaipur today. The company will invest about 30 billion rupees ($728 million) on the project, he said.
The introduction of a small car will help boost Honda's presence in Asia's fourth-biggest auto market, where annual sales are forecast to triple to 3 million units by 2016. Honda will compete with Suzuki Motor Co. and Hyundai Motor Co. who control about 70 percent of India's one-million-unit a year car market because they mainly sell hatchbacks.
"With GDP growth and an increase in individual incomes, car sales will continue to grow in India despite some issues like the rise in interest rates and oil prices," said R.K. Gupta, who manages the equivalent of $70 million in stocks at Credit Capital Asset Management in New Delhi.
Honda, which signed an accord with the Rajasthan state government on the plant today, didn't offer any details about the model it will manufacture.
"We have several options and a couple of them we are developing from scratch," Takedagawa said. "We are now in the premium segment, which is 20 percent of entire market; hatchbacks are 80 percent of entire market."
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Honda's cars in India are typically priced higher than equivalent models from other companies. The top-end Accord is about 17 percent costlier than the Hyundai Sonata Embera. Honda may follow a similar strategy when it starts selling small cars in India.
"We have no intention to compete with Maruti or Hyundai," Takedagawa said, without elaborating.
The Maruti 800 is India's cheapest car now at about 218,000 rupees. Tata Motors Ltd., India's biggest maker of trucks and buses, is developing an even cheaper car to be sold at 100,000 rupees, as it seeks to convert the nation's 45 million users of motorcycles and scooters into automobile owners.
Honda's Rajasthan plant will have the capacity to produce 60,000 cars a year when it goes on stream, Takedagawa said. Honda expects to raise that capacity to 200,000 by 2014, he said. The Rajasthan factory, which will employ as many as 4,000 workers, is expected to see the first car rolling off its assembly line in the October-December quarter of 2009.
The new car will be produced at a new factory in the western state of Rajasthan, Masahiro Takedagawa, chief executive officer of the local unit Honda Siel Cars India Ltd., said in an interview in the state's capital Jaipur today. The company will invest about 30 billion rupees ($728 million) on the project, he said.
The introduction of a small car will help boost Honda's presence in Asia's fourth-biggest auto market, where annual sales are forecast to triple to 3 million units by 2016. Honda will compete with Suzuki Motor Co. and Hyundai Motor Co. who control about 70 percent of India's one-million-unit a year car market because they mainly sell hatchbacks.
"With GDP growth and an increase in individual incomes, car sales will continue to grow in India despite some issues like the rise in interest rates and oil prices," said R.K. Gupta, who manages the equivalent of $70 million in stocks at Credit Capital Asset Management in New Delhi.
Honda, which signed an accord with the Rajasthan state government on the plant today, didn't offer any details about the model it will manufacture.
"We have several options and a couple of them we are developing from scratch," Takedagawa said. "We are now in the premium segment, which is 20 percent of entire market; hatchbacks are 80 percent of entire market."
Premium Pricing
Honda's cars in India are typically priced higher than equivalent models from other companies. The top-end Accord is about 17 percent costlier than the Hyundai Sonata Embera. Honda may follow a similar strategy when it starts selling small cars in India.
"We have no intention to compete with Maruti or Hyundai," Takedagawa said, without elaborating.
The Maruti 800 is India's cheapest car now at about 218,000 rupees. Tata Motors Ltd., India's biggest maker of trucks and buses, is developing an even cheaper car to be sold at 100,000 rupees, as it seeks to convert the nation's 45 million users of motorcycles and scooters into automobile owners.
Honda's Rajasthan plant will have the capacity to produce 60,000 cars a year when it goes on stream, Takedagawa said. Honda expects to raise that capacity to 200,000 by 2014, he said. The Rajasthan factory, which will employ as many as 4,000 workers, is expected to see the first car rolling off its assembly line in the October-December quarter of 2009.
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