Supply constraints due to the floods in Thailand are “wreaking havoc” at Honda’s Indian operations and forced the company to shut down production of the City sedan and Brio compact, a local report media said.
Honda Siel Cars India has also cut back Indian output of the Jazz [Fit] hatchback to a few hundred units, the Economic Times of India (ETI) said. To tackle the problem of shortage of parts, Honda is making emergency arrangements to source components from locations in China and Japan to ‘normalise’ output, it added.
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A senior Honda Siel executive said the company would have to slash output by around 95% in December and only a few hundred units would be produced to keep the plant running and maintain manpower. The company’s average monthly production, since launching the Brio last month, is about 6,000 units.
Jnaneswar Sen, senior VP at Honda Siel, confirmed to ETI output would be badly hit in December, adding that arrangements were being made to tap other areas for sourcing critical parts.
“We are looking at China and Japan very keenly. We hope to firm up things soon and return to normalcy in the coming months, though nothing can be confirmed as of now,” Sen said.
Sources told ETI that, while production of the City has already stopped, the Brio will be discontinued from next month. The Jazz will have a skeletal production, around 250 units, and a few hundred units of the Civic and Accord sedans will also be made.
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By GlobalDataIndian Honda dealers have stopped taking new orders for the Jazz due to the uncertainty and the model now has a waiting list of over six months. The Brio, too, has attracted a long queue of would-be buyers.
“The situation is very bad and December could perhaps be one of the worst months for Honda in India,” the sources said. The company has already started telling customers about the delay in delivery due to the Thai crisis.
The Brio, which has sold 1,500 units so far, has an order backlog of 6,000 units. Jazz orders total 4,000. Dealer and vendor sources, however, told ETI the situation on the City could improve by the middle of January and, for the Jazz and Brio, by mid-February.
Honda imports a variety of electronic components and underbody parts from Honda Thailand whose Ayutthaya plant is the ‘mother plant’ for India’s Brio and City production – these models are also built, along with the Civic and Accord, in Thailand, in a plant which was inundated by the floods on 4 October and for which repair estaimates of at least six months have been suggested.
ETI noted that the damaging floods came at a time when Honda Siel appeared to be coming out of tough times after a massive price correction on the Jazz and the City and launch of the Brio, its lowest-priced car in India.
Thailand was the first market where the Brio was manufactured and India followed later. A lot of the car’s key parts are sourced from Thailand with which India also has a trade agreement – known as the early harvest scheme – through which components can be imported at lower duty rates.
An official Honda spokesman said India is not the only market to face production halt due to disruption of supplies from Thailand. Its plants in Philippines, Indonesia and Vietnam are already shut due to the parts supply crunch.
Honda’s current supply constraints come after a similar problem earlier this year when Japan was hit by a tsunami and quake. Supplies of components was also affected back then, leading to a cut in output that affected HOnda plants worldwide.
