Motorcycle major Hero Honda has decided to shelve its plan for a third facility till 2005 in spite of rising demand for its bikes over the last few month.

The company has two plants, one in Gurgaon in the national capital region and the other in Dharuhera in Haryana. In April this year, the company revealed its plan to invest in an additional facility.

"Our non-compete agreement with Honda terminates in 2004 after which we are free to enter the scooter market. We will consider investing in a new facility only after our scooter project has taken off, till then we will run our facilities to full capacity to meet the demand," said Atul Sobti, senior vice-president, marketing and sales, Hero Honda.

Hero Honda, which has restricted its activities in the two-wheeler market to manufacture motorcycles, can diversify into scooters only after April 2004.

The company is hoping to kickstart its scooter manufacturing activities by early 2005 and will debut with an ungeared offering.

"Though scooters account for only 24 per cent of the current two-wheeler market, it is still a fairly big market in terms of volumes. Hero Honda will definitely be a part of this market," Sobti said.

Earlier this year, the installed capacity at both facilities was increased 15 per cent and currently stands at around 2.2 million vehicles a year, that is roughly 200,000 bikes a month.

Meanwhile, Honda Motor Scooters, which has already established itself as a force to reckon with in the scooter market, is expected to ride into the motorcycle market in June 2004.

After renewing their agreement with Honda for another 10 years earlier this year, the two companies have chalked out Hero's product plans for seven years.

Hero has a clutch of products in the pipeline, the first of which will entail an investment of Rs 100 crore (Rs 1 billion) and will hit the roads in November-December 2004.