Closing a factory, Honda cuts India's automotive production capacity by 40%

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Closing a factory, Honda cuts India's automotive production capacity by 40%

2020-12-28

According to foreign media reports, Honda Motor will cut India's four-wheel vehicle production by 40% and close a manufacturing plant. Honda has two car manufacturing plants in India. The epidemic has forced factories to produce less than capacity, and Indian car sales have been hit hard. By integrating the Indian factory, Honda aims to increase efficiency. At the time of this decision, Honda is seeking to reduce excess capacity globally, with the goal of increasing the profitability of the automotive business.

Honda's plant to be closed is located in Noida, Uttar Pradesh, India. This factory was built in 1997 and has an annual production capacity of 100,000 cars. The ultra-compact car Metropolis is one of the most important cars produced in this factory. Since then, all Honda production in India will be completed at the updated Tapukara plant in Rajasthan.

Honda's two plants in India have a combined annual production capacity of 280,000 vehicles. However, approximately 98,000 vehicles will be produced in fiscal 2019. Honda's market share in India is 3.7%, lagging behind Maruti Suzuki and Hyundai, which account for 51.7% and 17.6% of the market respectively.

Honda’s shift of production work hit the Indian Prime Minister Narendra Modi's "Made in India" initiative, which aims to turn India into a manufacturing center. Currently, as Japan seeks to reduce its dependence on China and diversify its supply chain, India is very eager to attract Japanese companies to invest in the country.

Under the leadership of former CEO Takanobu Ito, Honda has a bold and aggressive goal of selling 6 million vehicles worldwide every year and establishing or expanding factories globally. In 2014, Honda began full-scale operation of its second plant in India, the Tapukara plant. However, these expansions and expenditures have hit Honda's profit hard, reducing the company's automotive business profit margin to 1.5% in fiscal 2019 (excluding the financial sector).
Honda’s current CEO Takahiro Hachigo’s mission is to optimize operations and has closed its factories in Sayama, Japan and Swindon, UK. In an uptrend market, Honda also halted auto production in the Philippines and Argentina.

Reprinted from Gasgoo

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