Honda Motor’s Indian car making unit will invest 1.5 billion rupees ($US33 million) to boosting plant capacity to meet growing demand for its best-selling City model, a company official told Reuters on Tuesday.

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The City is a compact four-door sedan designed for Asian markets and is also built in Malaysia, Pakistan, the Philippines and China. It is also shipped ‘back’ to Japan as the Fit Aria.


Hajime Yamada, chief executive of Honda Siel Cars India Ltd., told Reuters the company planned to raise annual capacity to 50,000 units by the end of 2005 from 30,000 to help cut the waiting list for its City sedan.


Honda Siel Cars, a joint venture between Japan’s second-largest automaker and local firm Siel Ltd. (SIEL.BO), began selling cars in India in December 1997 and has invested 6.0 billion rupees in the country since then, the news agency noted.


“So far the plan is to manage the expansion without any kind of debt,” Yamada reportedly told a news conference to launch a new version of its CR-V sports utility vehicle.

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Reuters said Honda competes mainly with Ford, Hyundai, and local firm Tata Motors in India’s ‘mid-size’ car market and has faced surging demand for the new version of its City car since its launch there in October 2003. Honda also makes the Accord family saloon at its plant on the outskirts of Delhi but imports the CR-V sports utility vehicle fully-built for sale in India.


Yamada told Reuters the company had raised its sales plan for the business year ending next March to 37,000 vehicles – 32,800 Citys, 3,000 Accords and 1,800 CR-Vs – from 32,000 announced earlier because of growing demand for the City. Honda India sold 21,703 vehicles in 2003/04, including 18,392 Citys, 2,111 Accords and 1,200 CR-Vs.


The updated CR-V SUV for India has a 2.4 litre petrol engine, compared with the earlier 2.2 litre, and a price tag of 1.457 million rupees in Delhi. Aversion with automatic transmission is priced at 1.557 million, the report added.


Yamada reportedly said the company’s net profit was expected to rise by more than half in 2004/05 from 750 million rupees in the previous year on a 56% jump in revenue to 25 billion rupees.


He also said the company was also working to boost the local content in the City to 79% by the end of March from 69% to help reduce costs.


Honda’s priority is to consolidate its position in the premium segment although it is also studying the market for new model launches, Yamada told Reuters, which noted that Honda does not yet have a presence in India’s main mini and compact car segments.