The reversal of fortune for Hero Honda
The overall boost in sales and growth is quite good and comfortable for Hero Honda, but not in terms of production. The country’s largest two wheeler company is facing the production capacity to meet the demand. All the three plants are already in full swing, as the company is strong in the market with more than 50%. In 2009-10, the sale peaked to 4.6million units courtesy rural and semi-urban segments. The net production of three units comes to 5 million and the expansion in the current FY seems vague. Hence, the company is exploring all possibilities to establish new facilities in the country.
Talks with various governments have commenced and by the end of the next year, there would be at least one facility. The company foresees a growth of 12-15% which means it will be able to sell about 5.15-5.30 million units in FY2010-11. Meeting this small variation of production and demand may not pose heavy problem but the situation might be different next year. In the meantime, the MD of Hero Honda hinted at the double digit growth in sales of two wheelers in this FY. The buying power of people will vary due to the facilities offered under government schemes. However, the company sees a soft pedal in its sale during this year despite its achievement of 23% sale in 2009-10.
The Haridwar unit is meeting the peak level of 1.8 million annual units, as a result of excise-free advantage. Other two units- Dharuhera and Gurgaon- are delivering 1.57 million units and 1.6 million units each, dominated by CD Dawn and Splendor models. Honda Motorcycle and Scooter India is coming out with a finalized version of a new facility in Rajasthan and it will be ready for operation by Q2 of 2011. As an interim step, the increase in production will be made in Manesar (Gurgaon) units with an increae of 33%. This would enable the company to manage the timely need.