Honda Motorcycles offers voluntary retirement to employees in India, letter shows

Honda Motorcycles and Scooters India (HMSI) made the offer to 'maintain its existence' in a competitive market

Honda Motor Co is offering voluntary retirement to a section of employees at its motorcycles and scooters unit in India amid slowing demand in the country following the COVID-19 pandemic, according to a company letter.

Honda Motorcycles and Scooters India (HMSI), the country's second-largest manufacturer of two-wheelers, made the offer to "maintain its existence" in a competitive market, it said in a letter to its employees' union dated January 5.

While automakers globally have been battered by the pandemic, companies in India have been hit by slowing demand since 2019.

"The Indian auto industry is going through an exceptionally challenging phase considering the prolonged demand slowdown and economic fallout from the coronavirus crisis," HMSI said in the letter, which was reviewed by Reuters.

"In these uncertain times, we are aligning our production strategy for improved overall operational efficiency with the objective of long term business sustainability," it said.

HMSI did not immediately respond to an email seeking comment.

The HMSI letter said the scheme can be availed by permanent employees who have completed 10 years of service or are over 40 as of Jan. 31, 2021. Based on the number of years of service, a senior manager or vice president would be eligible for a payout of 7.2 million rupees ($98,488), the letter showed.

While it was not immediately clear how many employees this would apply to, the company said the first 400 people to opt for retirement would get an additional amount of 500,000 rupees.

HMSI has over 7,000 employees across its four plants in India, according to a March 31, 2020 filing with the U.S. Securities and Exchange Commission.

Between April and November, the first eight months of the current fiscal year, HMSI's sales plummeted 32% to 2.4 million units with overall sales of motorcycles and scooters falling 25%, industry data showed. The automaker has the capacity to manufacture 6.4 million motorcycles and scooters a year in India, according to its website.

The move comes weeks after the Japanese automaker was also forced to shutter one of two car plants in India, with sales coming under pressure from competitors.