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Old 3rd April 2013, 10:48   #1
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Default Honda to double its annual production capacity to 240,000 cars


In our Honda Amaze Review (Honda Amaze : Official Review), we had predicted supply constraints for the compact sedan. While Honda is said to be readying an inventory of 10,000 cars by the time of launch, the company has a maximum production capacity of 10,000 / month for its entire portfolio. In the last 3 months, Honda has maintained a sales average of 5,400 cars. That leaves a production capacity of merely 4,600 / month for the Amaze. It's unlikely that Honda will compromise on deliveries of its more expensive & profitable cars (like the City) in favor of the Amaze.

Now, Honda India announces an investment of Rs. 2,500 crore in its Tapukara plant at Rajasthan. This investment will be used to build a new assembly line for cars with an annual installed capacity of 120,000 units, a new diesel engine component production line and a Forging plant. Currently, all Hondas are built at the company's Greater Noida (UP) facility.

The new assembly line and forging plant are scheduled to be operational in 2014. Combined with the capacity of the new plant, Honda India's total installed production capacity will be increased to 240,000 units / annum.

The new diesel engine line has begun mass production of critical engine components for the i-DTEC motor. The cylinder head, cylinder block, crankshaft, connecting rod, clutch case and transmission assembly are being supplied to the Greater Noida plant where the Amaze is manufactured. The plant will also export transmission parts to the European market.

The Tapukara production facility will be an integrated manufacturing plant including all functions of Forging, Press Shop, Powertrain shop, Weld shop, Paint shop, Plastic Molding, Engine assembly, Frame assembly and Engine Testing.
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Old 3rd April 2013, 10:51   #2
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Default Re: Honda to double its annual production capacity to 240,000 cars

So We can expect the long waiting lines for Dzire to shift towards Amaze now. With all the buzz around, i guess Honda is indeed going to price Amaze pretty aggressively and why not ?

Interesting !!
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Old 3rd April 2013, 11:12   #3
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Default Re: Honda to double its annual production capacity to 240,000 cars

This is the most interesting news, i am hoping that complete lineup will have both fuel variants to cater to all customers preferences.

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Now, Honda India announces an investment of Rs. 2,500 crore in its Tapukara plant at Rajasthan. This investment will be used to build a new assembly line for cars with an annual installed capacity of 120,000 units, a new diesel engine component production line and a Forging plant. Currently, all Hondas are built at the company's Greater Noida (UP) facility.
The investment has been announced now and my best guess is it takes a couple of years for the plant to be operational. So it does seem like Honda is playing its strengths very strategically and planning for 2015 onwards market conditions+scenario. Only problem is do we think Diesel would be such a game big changer in 2015?

Last edited by mayankjha1806 : 3rd April 2013 at 11:14.
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Old 3rd April 2013, 11:15   #4
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Default Re: Honda to double its annual production capacity to 240,000 cars

They surely need the added production capacity. The last few years have been really bad for Honda due to lack of the diesel engine. Even after that they still maintained a strong enough showing with only petrol offerings. And now with the diesel engine coming up first in the amaze and then in the more premium siblings would definitely give back some of that lost market share back to Honda.

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Originally Posted by mayankjha1806 View Post
So it does seem like Honda is playing its strengths very strategically and planning for 2015 onwards market conditions+scenario. Only problem is do we think Diesel would be such a game big changer in 2015?
Diesel may or may not be the preferred fuel in 2015. But we can be sure that it would still make for a sizeable chunk of the market, probably more than Petrol. So I guess Honda is going the right way in preparing for all scenarios.

Last edited by drmohitg : 3rd April 2013 at 11:19.
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Old 3rd April 2013, 11:18   #5
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Default Re: Honda to double its annual production capacity to 240,000 cars

I am confused, shouldn't it be the other way round. First increase production capacities and then launch products. By first launching products, Honda is ensuring that there are capacity constraints right from day 1 of launch. 2014 is still a long way ahead and if I am not wrong, Amaze will sell atleast around 6 to 7k per month. Now as GTO said, they will not divert production lines in favour of the Amaze. This will generate a backlog of ~3000 cars per month. Now till 2014, this number will rise to ~30000 cars. And Honda showrooms around the country will boast of waiting periods of several months due to 'high' sales numbers like they did for the Jazz, whereas on the other hand its due to low production capacity!!
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Old 3rd April 2013, 11:36   #6
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Default Re: Honda to double its annual production capacity to 240,000 cars

Quote:
Originally Posted by mayankjha1806 View Post
Only problem is do we think Diesel would be such a game big changer in 2015?
putting all other differences aside, if the companies continue to make Torquey Diesel engines, then it will be in demand ?! say, if Honda can come out with a much more refined engine than current competition, then, sure, it will be tough to beat.

Last edited by stringbh : 3rd April 2013 at 11:37. Reason: align
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Old 3rd April 2013, 11:42   #7
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Default Re: Honda to double its annual production capacity to 240,000 cars

What's the use of generating so much excitement in market without a production line ready to match the demand? I think Honda should have made a production line ready to supply at least 10000 Amaze cars per month, if it wants to challenge Dzire seriously.
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Old 3rd April 2013, 12:23   #8
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Default Re: Honda to double its annual production capacity to 240,000 cars

They sure look like they will need it now. Going by their claims, this diesel 1.5 looks like a fantastic gem of a engine, may even be called path breaking, if all the hoopla surrounding it holds true in real world conditions. Would love to see this engine in their Honda City. That could really make them regain all lost ground to Hyundai due to lack of a diesel.

Interesting times ahead for Honda.
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Old 3rd April 2013, 12:29   #9
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Default Re: Honda to double its annual production capacity to 240,000 cars

Production is fine, After Sales & Service is not as good as it used to be. I hope this is getting addressed as well, with the high sales expected from Brio & Amaze. Service centers definitely need to scale up to ensure the brand & quality don't take a hit.
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Old 3rd April 2013, 12:38   #10
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Default Re: Honda to double its annual production capacity to 240,000 cars

Dzire sells approximately 18K cars per month when the market is down.

With current capacity, approximately 4.5K Amaze can be manufactured per month. From 2015 additional 10K.

Hypothetical scenario until 2015:

Honda will definitely launch the Brio diesel before 2015, and conservatively, it should sell about 2K units per month (looking at Chevy Beat's least sales figures).

But before 2015, won't the next gen Honda City be launched; probably with a Diesel engine too? But for simplicity, lets just assume that it will only replace the current City Sales numbers.

So, Brio diesel sales cuts into Amaze's capacity and reduces it to 2.5K Amazes per month!! Is Honda expecting most customers to wait until 2015 to get their Amaze?

Somehow, it looks like either Honda is missing something or we are not having the complete picture.
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Old 3rd April 2013, 13:01   #11
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Default Re: Honda to double its annual production capacity to 240,000 cars

Honda confirms exploring the release of the Crossover, however they have not fixed any time frame of its launch in India.

http://motorbash.com/honda-researchi...not-fixed-yet/
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Old 3rd April 2013, 13:34   #12
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Red face Re: Honda to double its annual production capacity to 240,000 cars

Putting up a new plant is a good move by Honda but increasing capacity in the anticipation that Amaze is going to be a runaway success is counting chickens before they are hatched.

Honda is using the same modus operandi which they used for Activa and Maruti used for the Swift models, although they have been successful it will definitely leave a bitter taste with the customers if they have wait till eternity for the vehicles. Hope Honda does not disappoint with the Amaze.
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Old 3rd April 2013, 13:48   #13
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Default Re: Honda to double its annual production capacity to 240,000 cars

Thank you for the update GTO.

Honda lists the "optimum" capacity of their Noida plant at 120,000 units p.a., therefore this rules out the possibility of them exploring other avenues of boosting capacity till the new plant comes up such as starting up extra shifts.

What some people speculate is that Honda may price the Amaze ambitiously so as to prevent a mad rush at dealerships for their new car while also raking in a cool margin on each unit while being at close to full production capacity. Quite a gamble if you ask me.

The B.S. Motoring review of the Diesel Amaze VX found it valued at about 6.8 Lacs, by peeking at the car's insurance policy which was in the glove box. Although this by no means confirms the Amaze's price, it is a pretty good indicator pricing. In that case, Honda would be looking at extended waiting periods till the new plant comes up.

We have to remember that a diesel City would surely cannibalise heavily into the Petrol City's sales. Even in this day and age people are buying into the Honda badge for hassle free ownership despite it being a petrol. So you can be assured that Petrol sales would be halved when City Diesel sales begin, freeing up a good 2,000 units worth of capacity at the plant.
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Old 3rd April 2013, 15:30   #14
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Default Re: Honda to double its annual production capacity to 240,000 cars

I hope they can generate enough volumes to justify the 240,000 pa capacity. An excellent brand but perceived to be overpriced.
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Old 3rd April 2013, 16:02   #15
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Default Re: Honda to double its annual production capacity to 240,000 cars

Honda must have a trick up it's sleeves to increase production at the current facilities beyound 10,000 units if required, so that the shortfall is not as significant as it seems on paper today. There is always a decent bit more that one can do with increased shifts and some reallocation of resources/shifts/temporary labour etc. But this would take a toll on scheduled maintenance days etc.
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