Breaking News : Honda to Delay Opening of Second Car Factory in India

All-New Third Generation Honda City Designed for India

TOKYO : September 26, 2008 - Honda Motor Co., Japan's second- largest automaker, will delay opening its second car factory in India, as the pace of growth in the market slows.


Honda aims to open the plant in the northern Indian state of Rajasthan by October 2010 at the latest from its original schedule of 2009, Tokyo-based spokesman Sakae Uruma said by phone today. The engine parts and press units at the facility began operations today, the company said in a statement.

Higher auto loan rates and the fastest inflation in 16 years caused industrywide vehicle sales in India to fall in July and August, the first time in 2 1/2 years. General Motors Corp., Toyota Motor Corp. and Ford Motor Co. are among carmakers spending $6 billion to build factories in India.

``Demand is going down in the near term,'' said Vaishali Jajoo, a Mumbai-based analyst at Angel Broking Ltd. ``Still, companies are looking at the long-term prospects in India and are setting up plants now to meet the demand in future.''

The delay was first reported by the Wall Street Journal.

Honda's car sales in India fell 14 percent to 19,058 between April and August, according to the Society of Indian Automobile Manufacturers. The country's overall sales in the five months gained 6 percent to 491,538, half of last year's pace.

Growth Forecast

The grouping of all vehicle makers in the country last month cut its growth forecast for the year ending March 31 to 10 percent from as much as 13 percent saying inflation and higher rates are damping demand. Car sales may triple to 3 million by 2015, according to government estimates.

``For Honda, India is a very important market and our faith in India's growth story stays intact,'' the automaker's president Takeo Fukui said today at the site of the new factory. ``Our investment plans in India are on track.''

Tokyo-based Honda now produces the City, Civic and the Accord sedans from a factory near New Delhi. The company has so far invested 16.2 billion rupees ($349 million) in India, according to Honda India's Web site. The second plant, with an initial investment of 10 billion rupees, will raise Honda's annual production capacity to 160,000 vehicles by 2010, the company said today.

Honda's second factory will eventually raise capacity to 200,000 units per annum, the company said last year.

Honda is the fourth-largest carmaker in India this year, lagging behind Suzuki Motor Corp., Hyundai Motor Co. and Tata Motors Ltd. Honda had 3.9 percent of the market between April and August, according to the automakers' group.

[Source : Bloomberg]