Honda to set up Rs1,000 crore small car unit in Rajasthan

Mumbai: Honda Motor Co., Japan''s second-biggest carmaker, will set up its second manufacturing unit in India at Alwar, Rajasthan, which will start production of its first small car model in India in 2009.

>Honda Siel Cars India (HSCI), a joint venture between Honda Motor Co. and Siddharth Shriram group firm Siel Ltd, has signed a memorandum of understanding with the Rajasthan state government for setting up the Rs1,000 crore plant.

>The new plant is scheduled to be commissioned during October-December 2009 and would have an initial capacity of 60,000 units per annum, said Masahiro Takadegawa, president and CEO of HSCI.

"We plan to manufacture two models from the plant. One model will be a new small car and the second will be from our existing line-up."

The company, he said, would invest an additional Rs1,000 crore for raising capacity to over 200,000 units per annum after 2009. He, however, did not disclose the details of the small car that would be rolled out of the plant.

Honda Siel has its existing car plant in Greater Noida, Uttar Pradesh.

>Honda expects the introduction of a small car to boost its 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 together control about 70 per cent of India''s one-million-unit a year car market mainly from hatchback sales.

>``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 per cent of entire market; hatchbacks are 80 per cent of entire market.''''

>Honda''s cars in India are priced higher than equivalent models from other companies. Honda may change its pricing strategy when it starts selling small cars in India.