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Our goal is to have 100% localisation to be more competitive: Keita Muramatsu

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Since the termination of the joint venture with the Hero Group, Honda Motorcycle and Scooter India has made inroads into the Indian two-wheeler market. Keita Muramatsu, CEO of HMSI, tells Sharmistha Mukherjee that despite the moderation in growth in the domestic two-wheeler industry, the firm expects to increase sales by 50 per cent in the next financial year. Edited excerpts:

The technical centre at Manesar is said to be a one-of-its kind initiative for Honda. How different is it from your other R&D facilities globally?
Unlike in other Honda two-wheeler R&D centres, here, the engineering, purchasing and development are happen at the same place inside the factory. Our Vision 2020 depends on speed.

From the manufacturer’s point of view, we have to consider how we can develop products with speed, make decisions and arrive at conclusions immediately. If the entire R&D team is under one roof, it means that any department can make suggestions. If there is a problem, the R&D team can sort it out, the purchasing team can check quality and at the same time consider costs.

All processes can be completed in minimum time as teams do not have to travel from outside to vet or change development processes.

We have technical centres in Italy, China, Japan, Thailand, Vietnam, Indonesia, the US and Vietnam. But it is only in Manesar that we have set up such an integrated facility.

So, what is the mandate for the team at the technical centre? Will they also pitch in to develop global products for Honda?
The focus is on the domestic market. India-specific products developed at the centre may later be exported to other countries. We want to localise our parts further. Currently, 96-97 per cent of the components are sourced from the Indian supplier base. Around three per cent of all components are imported. But the final goal is to have a 100 per cent localisation level to be more cost competitive. It is like dealing with opposites – the product has to be cheapest, but of the highest quality. It has to have high technology, but also be affordable.

So localisation is important.

HMSI’s current product range is priced upwards of Rs 44,000. With the technical centre in place, will we now see low-cost products from the company?
We have started selling the Yuga. Now, we have to consider how to improve the bike. We are also exploring the possibility of launching a low-cost bike. We have to strengthen total development, purchasing, engineering and quality procedures. Our former president Shinzo Aoyama had said that HMSI would aim at becoming No. 1 two-wheeler brand in India by 2020. Across our units, we would have production capacity of little less than 4 million two-wheelers by the end of next year. That is the plan. But it is a big challenge to expand by an additional 1 million units. You have to bring in a million customers. We have to work on how to give more high quality products, decrease costs and improve customer care at the dealer end.

HMSI outperformed the industry to grow volumes by 37 per cent till December. What is the company’s sales expectation in FY14?
In the last financial year, we sold 2 million units growing by around 29 per cent. This year, we will sell 2.6 million in the domestic market, a growth of 30 per cent. In FY14, this will increase to 3.9 million units (50 per cent growth). It is a big challenge. We are working on improving quality and along with mileage in both scooters and motorcycles. We will focus on capacity building, dealer network development and developing better products at our technical centre to grow business.

At the pace you are growing, will the capacity set to come in from the third unit suffice for the company?
We have to consider building more capacity. We have to investigate when we need capacity beyond our third unit for increasing our growth. The industry is slowing down and has grown by around 4 per cent so far this financial year. So we have to carefully check the market and decide on our business structure.