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Honda considers merging its two entities in India

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Japanese auto maker Honda Motor Corporation (HMC) is considering consolidating its various holdings and merging its automotive entities in India into one company, according to sources.

But a spokesperson at Honda Siel Cars India (HSCI), a joint venture (JV) between HMC and Shriram Industrial Enterprises Ltd (Siel), declined to comment on the issue.

 

 

HMC sells passenger cars, sport utility vehicles, motorcycles and scooters in India through two entities, Honda Motorcycle and Scooter India (HMSI) and HSCI. While HMSI, Honda’s fully owned subsidiary, hawks two-wheelers, HSCI manages the passenger vehicle business. Through Usha International Ltd, Siel owns five per cent in the car company that was set up in 1995.

While Honda has been present in the two-wheeler space in India through a JV with the Munjals-promoted Hero Group since early 1980s, it was only in 1999 that the company stepped up its presence by setting up its own arm. In the recent past, Honda has preferred to chart its own course.

In December 2010, HMC announced the termination of its 26-year-old JV with the Hero Group in Hero Honda Motors Ltd to go solo. The Indian two-wheeler market is one of the largest in the world, and the JV with the Munjals had prevented Honda from focusing on India operations single-mindedly.

Since then, HMSI has grown to overtake Chennai-based TVS Motor Company to become the third-largest two-wheeler maker. Between April and February of this financial year, HMSI logged 26 per cent growth at 1.78 million units. It intends to become India’s largest two-wheeler player by the end of the decade, and is investing Rs 1,000 crore to set up its third plant in the country.

On the passenger vehicle front, Honda commenced sales operations in India in 1998, with its flagship sedan, City. But an increased competition from global players saw the company losing its market share over the decade.

Lack of diesel engines has added to its woes. Between April and February, its sales declined by 22.32 per cent to 43,411 vehicles. Last year, compatriot Toyota sold 136,000 units to become the country’s fifth-largest car maker.

Though sales were limited during the period due to constraints in component supply from Japan and Thailand, HSCI’s volume had seen a drop even in the previous financial year. This was at a time when the automobile industry in India grew by 29 per cent to 2.52 million units.

The company introduced its first small car, Brio, in October last year, after selling larger cars for more than a decade. Its market share has slipped to less than two per cent.