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Honda picks India over China - Views on News from Equitymaster
 
 
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  • Aug 18, 1999

    Honda picks India over China

    News reports reveal that, the US$ 45.5 bn Japanese auto major, Honda Motors, has chosen India over China as a hub for its global two-wheeler business. However, the company has acknowledged that China and India will continue to form the cornerstone of its two-wheeler business, due to the large two-wheeler market in both these countries. Earlier, Honda's plan to set up a 100% subsidiary in India for two-wheelers received the green signal from the Foreign Investment Promotion Board (FIPB).

    The manufacturing facility is expected to become operational in 2HFY01. The company plans to start exporting in third year of operation. The first three years of operations is estimated to garner US$ 18 m.

    Honda Motors' decision to make India its global base for two-wheeler production, follows closely on Fiat's (of Italy) move to use its Indian plant (at Ranjangoan) for passenger car exports. While it is yet too early to call this a trend, the confidence that auto majors like Honda and Fiat have placed in India, preferring it over China, is commendable. And India doesn't even have a stable government as yet!

    Earlier there was some apprehension whether India would ever attract global auto majors after the Indian government's differences with Suzuki over the appointment of a MD for Maruti. But these fears have now been allayed to an extent.

    Only time will tell if both Honda and Fiat will benefit from their decision to outsource from India. But even if they meet with marginal success, it may tempt other auto majors to look at India as a base, given India's stable economic credentials and a vibrant auto market.

     

     

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