Honda plans powertrain facility in Rajasthan

Honda Siel Cars India (HSCI) is planning to set up a powertrain facility in the country.

The second largest Japanese car manufacturer (in sales) in India after Suzuki, may accommodate the new facility inside its manufacturing plant in Rajasthan, which would be operational by the first quarter of 2009 to produce 200,000 units annually. The Japanese company has allotted 600 acres for this unit.

The company refused to divulge investment details. According to market estimates, the cost for building a powertrain facility will be over Rs 600 crore.

"The company is working on a powertrain facility inside its Rajasthan unit. Since we are expanding operations in India we would like to seriously consider it," said a company executive.

The company is scaling up production at its Greater Noida plant to 100,000 units from 50,000 units per annum. It aims to produce 150,000 units annually by 2010 from both the plants.

But as the actual capacity (of both the plants combined) stands at 300,000 units, this has forced the company to consider a powertrain facility. Apparently, for a powertrain facility to be commercially viable a company should have a minimum capacity of 300,000 units per year.

HSCI has a foundry and machining unit in Greater Noida which partly makes finished components, sourced from overseas and from the Indian market. The powertrain facility will help the company establish a full-fledged engine and gearbox manufacturing centre in the country and reduce dependency on imports. HSCI will need active support from its engine making centre for its proposed small car, which is expected to hit the Indian roads in 2009.

Ford Motor Company, is also considering to set up a diesel powertrain facility, using the spare land in its Chennai complex.

Ford has already shown its interest in the diesel segment in the country where sales are expected to arise in a few years compared with the total size of the automobile industry. About 45 per cent of all cars sold in the country will be diesel by 2015, a Siemens-VDO study has said.

With the new initiative, Honda is also aiming to tap the huge and inexpensive auto parts market in the country.

The company will also hike localisation content, which will help the end price of the car to come down.