Hero Honda kickstarts expansion  ( May '31,2006, Daily News & Analysis)

As usual, Hero Honda has outlined an ambitious roadmap for the future. India’s largest two-wheeler maker is planning to invest Rs 550 crore in capacity expansion.

Besides launching its first fuel injection 125cc bike this fiscal, the company is also planning to introduce eight new bikes in the market.

Hero Honda, which already has manufacturing facilities in Gurgaon and Dharuhera, has decided to establish a unit in Jaipur. It is also thinking in terms of a fourth facility in the domestic market.

Of the total expansion cost, Rs 320 crore will be invested at its Jaipur facility, which will initially have a capacity to manufacture five lakh units per annum. The company will invest the remaining Rs 230 crore to scale up its Jaipur capacity to one million units eventually.

The company is already in the process of enhancing capacity at its existing plants in Haryana, which will need another Rs 100 crore and take the total installed capacity of the unit to 3.9 million units.

Pawan Kant Munjal, managing director, Hero Honda, said, “We will continue to drive growth by consolidating our product line-up. All the new launches will be in the bike segment, no new scooter is being launched this fiscal.”

He said the new fuel injection engine has been fitted on Glamour F1, a 125 cc bike, and this product will be unveiled in India next month.

And even as the company declared robust results for the fiscal ended March 31, it cautioned that operating margins would continue to remain under pressure. Munjal said, “The steep increase in input costs will continue to impact margins but we do not foresee any immediate need to hike product prices.”

Hero Honda crossed the three million unit sales mark last fiscal to close the year at 3,000,761 units. It claims 40% share of the domestic two-wheeler market.