Honda will cut production at its Indian subsidiary by up to half from May 2011. This will result in a revenue loss of around Rs 200 crore for the local operations.
The proposed reduction is because of disruption of component supplies in the wake of last month’s earthquake and tsunami in Japan. The Greater Noida-based plant of Honda, the joint venture between Honda and the Siel group, will operate a single shift as against the two shifts it would operate before the disaster struck Japan.
The Japanese auto major, which is facing a shortage of critical components such as engines and electrical parts, intends to normalise production within the next three months.
“We are experiencing gaps in our supply chain due to the situation in Japan, resulting in production cuts. This has affected production of all models. We plan to get back to normal production after July as soon as supplies normalise,” said Jnaneswar Sen, senior vice-president, marketing & sales.
The restructured production plan will see about 2,500 fewer vehicles being produced a month. The automaker produces on an average 5,000 units a month at its JV, in which the Japanese company holds 97 per cent equity. In India, Honda produces the Jazz, City, Civic and Accord with indigenisation levels of 77 per cent, 76 per cent, 74 per cent and 28 per cent, respectively. The sports utility vehicle CR-V is imported as a completely built unit.
According to a statement Honda Siel issued on Monday, “The situation with parts supply in Japan remains fluid, production of component parts and vehicles at Honda plants is at approximately 50 per cent of the original production plan. Honda is working with its suppliers to help re-establish their operations, while evaluating other possible sources for those parts in the supply chain.”
Last week, Japan’s Toyota Motor said it will cut production at its Indian subsidiary by up to 70 per cent between April 25 and June 4 due to disruption of supplies. The restructured production plan will see about 7,000 fewer vehicles being produced a month, leading to a revenue loss of around Rs 500 crore for the Indian subsidiary.
Suzuki, which operates in India through Maruti Suzuki, may also face problems. Japanese carmakers in India, including Nissan, sold around 12.93 lakh units, or 52 per cent of the total 25.20 lakh cars sold in fiscal year 2011.