Japanese auto giant Honda Motor Co. plans to double its production capacity in India by next year, set up a fully owned subsidiary and invest about $650 million over the next 10 years to expand its business here, the company's chief executive said Monday.
President and CEO Takeo Fukui said Honda saw India as a more important market than China, and the growth potential here was the highest.
Expanding business in India is "one of Honda's three key global strategies, together with strengthening the foundation of our business in the U.S. and Japan, and enhancing Honda's leadership commitment to protect the environment," Fukui said after a series of meetings with Indian partners.
But the company won't commit to any big-ticket investment right away. As of now, it plans to invest about $650 million -- much less than the billions of dollars the company has invested in China -- over the next 10 years.
Although India's booming economy has increasingly lured Western investors in recent years, Japanese firms have been cautious about expanding their operations here, largely because of stringent labor laws and doubts over whether the current boom would be sustained. Both Honda and Toyota Motor Corp. have labor unrest at their plants.
But Fukui said Honda usually preferred to scale up its operation "step by step" as it did in other places including the United States. "In Honda, we say: 'Start small and grow big.' "
Its auto plant in Greater Noida, which neighbors New Delhi, has a capacity to make 50,000 cars.
"By the end of next year, we will double this annual capacity to 100,000," Fukui said.
The company sells just two models in India -- the City and the Accord. It has scheduled the launch of a third model -- the Civic -- for today.
The launch of the Civic model coupled with plans to sell a small car in India will help Honda triple its annual sales to 150,000 by 2010, Fukui said.
Meanwhile, the company has decided to establish a new, fully owned subsidiary to consolidate its business, Fukui said, in what appeared to be the first move toward building independent business operations here.
Honda entered India in 1984, setting up a joint venture with a local company to manufacture motorcycles. That company -- Hero Honda Motors Ltd. -- has since become India's largest motorcycle manufacturer, selling 3.6 million bikes last year, according to company figures.