Honda Manages 50% Cut in India Output

Honda Motor Co.'s production cut in India will continue until July due to lower supply of parts from Japan after the March earthquake and tsunami forced auto makers to shut factories there, a senior executive at its local unit said Thursday. A three-month output cut is likely to further affect Honda's India sales, which fell 4% to 59,643 vehicles in the financial year ended March 31 because of a lack of new models and increased competition from the likes of Toyota Motor Corp. and Volkswagen AG.

However, Jnaneswar Sen, senior vice president for sales and marketing at Honda Siel Cars India Ltd., said the production cut is unlikely to delay the introduction of the Brio small car, scheduled for September. "We expect supply of parts to normalize after July only. Till then, production will be half, or about 2,500 vehicles a month," Mr. Sen said. Honda Siel Monday said it will cut vehicle production by about half at its Greater Noida plant in northern India's Uttar Pradesh state from May but didn't say when production will return to normal levels. Honda Siel sources some engine and electronic parts from Japan.

The Japan disasters also impacted production at Toyota's local unit, Toyota Kirloskar Motor Pvt. Ltd., which said last week that both its plants in southern India's Karnataka state will operate at about 30% of normal capacity from April 25 to June 4. Honda Siel, 99.9%-owned by Honda Motor and 0.1% by India's Siel Ltd., makes the Jazz hatchback as well as the City, Civic and Accord sedans at the Greater Noida plant. The factory has an annual installed capacity to make 100,000 cars, or about 8,300 cars a month, but currently makes about 5,000 cars a month, in line with demand.

The company has another factory in Alwar in northwestern India's Rajasthan state, where it makes engine parts such as connecting rods and crank shafts for the Jazz and City models. Mr. Sen said the company is hopeful that parts constraints will be resolved before the introduction of the Brio. "We are planning to introduce the Brio around the festival season and are hopeful that the situation will improve before that," he said. The festival season in India usually starts in late September.

The Brio is crucial for Honda to improve its position in India where small cars make up for two-thirds of total passenger vehicle sales. Demand for new cars has been rising steadily in India thanks to rising personal incomes, new models and cheaper loans. Local car sales grew 30% last financial year, the fastest in more than a decade, to 1.98 million units. Sales are expected to grow between 16% and 18% this financial year, according to auto industry body the Society of Indian Automobile Manufacturers.

Separately, two auto parts suppliers to Honda, who didn't wish to be named, said the company is aiming to sell 50,000 units of the Brio in the first year after introduction. However, Mr. Sen said the company hasn't fixed any sales target. "We would surely like to sell as many Brios as possible," he said. "We are yet to firm up any sales target for the Brio as we haven't decided on the price. Pricing plays a crucial role in deciding how many cars can we sell."