Honda to build 2nd motorcycle factory

Honda Motor Co, the world's biggest maker of motorcycles and scooters, will build a second factory in India as demand grows in the world's second-largest two-wheeler market.

The company is conducting a feasibility study for a new plant, Yukihiro Aoshima, president of Honda's Indian unit, said in New Delhi today. The unit now has an annual production capacity of 1.2 million motorcycles and scooters in India.

Honda's new factory and its plans to sell new models also increases competition for its affiliate Hero Honda Motors, India's biggest motorcycle maker. Demand may grow at an average 10 per cent till the end of the decade, helped by purchases by some 500 million Indians who are aged 25 or below, according to the Society of Indian Automobile Manufacturers.

There is a huge young population in India that is taking to the motorisation," Aoshima said. "The market is big enough in India for both us and Hero Honda to co-exist."

Honda has 26 per cent stake in Hero Honda Motors, through which it has been selling motorcycles since 1985. In 2001, Honda started selling scooters on its own and in 2005 started selling motorcycles through its fully-owned unit. A record 7.06 million motorcycles and scooters were sold in India in the year ended March 31, with Honda and its affiliate Hero Honda controlling a combined 49 per cent of the market.

Sales of Activa and Dio scooters and the Unicorn and Shine motorcycles will rise to 900,000 in the year beginning April, 25 per cent more than in the financial year ending March.

Honda, which has a factory at Manesar, near New Delhi in north India, wants to increase capacity to 2 million units annually in India by 2010 and sell 100-cc motorcycles, Aoshi said. The company also plans to import motorcycles with engines bigger than 500-cc, he said.