After floating a VRS scheme for the manufacturing department employees, Honda Cars India now decided to pull the plug from its Noida plant.
In a blow to Uttar Pradesh’s manufacturing industry, Honda Cars India Ltd (HCIL) is shutting production at its Greater Noida plant in December 2020 after being operational for more than 20 years. The plant that rolled out Honda City, CR-V and Civic from this facility in November 2020, will shift the production to Tapukara factory in Rajasthan that has a total capacity of 180,000 units per annum. So far, no car has been produced at the Uttar Pradesh facility this month.
This move is not unprecedented though as in October 2019, news floated that production will not continue in the Noida plant and that the firm is looking to make the facility into an R&D and CKD operations hub.
However, despite manufacturing operations being discontinued, corporate office and R&D department of the automaker will continue to operate from the Greater Noida plant. The move comes as part of the Japanese automaker’s streamlines business strategy, under which it floated a voluntary retirement scheme (VRS) for the permanent employees of manufacturing department at the same plant earlier this year.
Honda Cars India’s sales have slumped by around 50% in the last four years forcing the company to reconstruct its manufacturing operation. This has prompted the company to pull the plug from the Noida plant and shift its production to Tapukara. Instead, the Noida facility will now act as the automaker’s R&D hub.
Honda Cars India has been facing a tough time since 2018, due to the economic crisis. Later the Covid-19 pandemic came as salt to the wound.
The Greater Noida plant of Honda Cars India started its operation with a production capacity of 30,000 units per annum. Later the capacity was upgraded to 100,000 units per annum. Currently, the plant has the capacity to produce 120,000 cars per year.
HCIL’s Noida plant’s manufacturing department employed around 2,000 staffs, which has been reduced to around 1,000 permanent employees now, after many opted for VRS and rest have been transferred to the automaker’s Tapukara plant.
In 2014, Honda Cars India was the third-largest carmaker in July 2014, when it registered monthly volume of 15,709 units, leaving behind Mahindra & Mahindra. During April-June FY15, Honda Cars India had its best sales performance in the domestic market with around 7% market share, which has dropped to around 3% now.
The fall in sales volume for the Honda Cars India can be attributed to its strategy shift, under which the carmaker decided to focus on the premium segment instead of mass-market models.
In November 2020, Honda Cars India registered a 9% YoY drop in sales at 9,685 units, as compared to 10,646 units sold in the same month a year ago. The automaker has recorded a 0.5% drop in market share with 3.3% in November 2020, as compared to 3.8% a year-ago month.
Honda started operation in India back in 1997, closer to the time when Hyundai also entered the Indian market. The Japanese auto major started operation through a joint venture with Usha International of Shriram Group as Honda Siel Cars India. After 15 years, in 2012, Honda got out of the JV and started operations as Honda Cars India Ltd. Since then, the automaker has invested around Rs 9,000 crore in its two plants in Greater Noida and Tapukara.
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