Honda two-wheeler (HMSI) firms up plans for third plant; we reiterate our negative stance on Hero Motocorp: JPMorgan,

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 HMSI to expand capacity further: Honda Motorcycle and Scooter
India (HMSI) commenced groundwork on its third two-wheeler plant –
raising its installed capacity to 4MM units by 2013 (from 1.6MM units
in FY11). Honda thus appears to have aggressive plans in India after the
split with its local partner, Hero, and we see competitive intensity rising
in this space. While HMSI is currently the market leader in scooters, it is
launching new products in the mass market motorcycle segment to
expand its product portfolio.
 Total production capacity to reach 4MM by the first half of 2013:
The plant would increase HMSI’s total annual production capacity to
4MM units, including 1.6MM units at the first plant at Manesar
(Haryana), 1.2MM units at the second plant at Tapukara (Rajasthan) and
1.2MM units at the third plant.
 HMSI to invest Rs13.5B in new plant: HMSI has laid the foundation
for its third two-wheeler production plant at Narsapur, in the southern
state of Karnataka. The new plant will come on stream in the first half of
2013, with an annual production capacity of 1.2MM units in the first
phase and will entail an investment of Rs13.5B, according to HMSI’s
President Mr Keita Muramatsu (source: Economic Times). Subsequently,
the capacity will be enhanced to 1.80MM vehicles p.a.