Amid falling two-wheeler demand and stringent government regulations, Honda Motorcycle and Scooter India (HMSI) is reconsidering any fresh investments to increase production capacity and launch electric vehicles in India.
The local arm of the Japanese manufacturer will, however, continue with the planned investments. Minoru Kato, president and CEO of HMSI, said manufacturers and suppliers had already invested a lot for transition to BS-VI emission norms from April 1, 2020.
New investments is under consideration. We are going to have new features and new technologies but investment on expansion of production capacity needs reconsideration, Kato told reporters on the sidelines of an event to unveil Activa 125 cc scooter with BS-VI emission norms-compliant engine. The company has no plans to launch electric two-wheelers in India, despite the government’s proposal to allow sale of only battery-powered two-wheelers below 150cc by 2025. Kato said the aim for conversion by 2025 was quite early and the proposal required more deliberations. 2025 is too early to changeover to 100% in below-150 cc bikes, he said.
The two-wheeler industry leaders, including Hero MotoCorp s Pawan Munjal and Bajaj Auto s Rajiv Bajaj, have opposed the government’s proposal, calling it impractical and untimely .
Kato said HMSI would continue with the planned expansion of its Gujarat factory at an investment of `630 crore. The additional 600,000 capacity will push up the brand’s total capacity to 7 million units by 2020.
Two-wheeler demand remained lacklustre for the seventh consecutive month in May, falling 6.56% year on year (yoy). It was dragged down by steep decline reported by companies, including Hero MotoCorp and HMSI. Demand was affected by hike in insurance premium in September 2018, and subsequent price hikes taken by companies on April 1 on account of new safety norms. The worst hit was HMSI, which saw an over 46% y-o-y decline in domestic sales in March. The company had cut production by 66% yoy in March as dealers were flushed with inventory of up to 80 days. In the April-May period, too, the company’s sales dipped 22.7% yoy.
HMSI on Wednesday unveiled Activa 125cc scooter with BS-VI emission norms-compliant engine, which will be launched by the end of the second quarter and would be 10-15% expensive than the BS-IV version, Kato said. The BS-IV scooter is priced up to `64,733 (ex -showroom Delhi). The 125cc scooter makes up for around 20% of the total scooter sales in India. Domestic sales of scooters were flat at around 67 lakh units in FY19.