Honda Buys 380 acres for a Plant in Gu­jarat

The Economic Times - - Brands: Creating Desire - Ke­tan.Thakkar @times­

Mum­abi: Honda Mo­tor spent an es­ti­mated ₹ 1,000 crore to ac­quire 380 acres in Gu­jarat to set up a man­u­fac­tur­ing unit, as the Ja­panese au­tomaker bets on the long-term po­ten­tial of the In­dian mar­ket de­spite its fac­to­ries now pro­duc­ing fewer cars than what they are de­signed for.

The new site is at Vitha­la­pur, about 80 kms north-west of Ahmed­abad, where Honda last year opened a fa­cil­ity for two-wheel­ers. Honda Cars In­dia bought the land from pri­vate in­di­vid­u­als and com­pleted trans­ac­tions early this month.

The land ac­qui­si­tion comes as a sur­prise, as the com­pany’s cur­rent fa­cil­i­ties — at Greater Noida and Ta­pukura, Ra­jasthan — utilise just 60-70% of their com­bined pro­duc­tion ca­pac­ity of 2,40,000 ve­hi­cles. But with chal­lenges of land ac­qui­si­tion and ris­ing relty prices, it wants to de­risk it­self from fu­ture volatil­i­ties, peo­ple in the know said.

“We have fin­ished the land ac­qui­si­tion re­cently,” Honda Cars In­dia chief ex­ec­u­tive Yoichiro Ueno told ET. “Honda is con­fi­dent of long-term po­ten­tial growth of In­dia and is com­mit­ted to the re­gion. At GDP growth of 7% per an­num, it is among the fastest grow­ing mar­kets and Honda would want to par­tic­i­pate in its fu­ture growth.”

Honda ex­panded ca­pac­ity in In­dia to more than 2,00,000 units from 60,000 in a short span of time. Part of it was in diesel ve­hi­cles, seen as a must-have un­til a cou­ple of years ago for au­tomak­ers to suc­ceed here. But cus­tomer pref­er­ence is shift­ing back to petrol as the price dif­fer­ence has nar­rowed. Au­tomak­ers like Honda are sit­ting on un­der­utilised diesel ca­pac­i­ties as a re­sult. To re­gain the lost mo­men­tum, Honda is ready­ing new here. Hav­ing the land ready will al­low the com­pany to re­spond quickly to im­prove­ment in de­mand as and when it hap­pens.

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