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Honda expanding China production

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Honda, Japan's No. 2 car company, has one factory in China and is seeing its three biggest rivals expand there  

By Alex Frew McMillan and wire reports

HONG KONG, China -- Honda Motor Co. will follow its peers in expanding production in China, it said Friday.

It has a joint venture plant with Guangzhou Automobile Group. Honda reaffirmed on Friday that it is looking to expand production at that factory.

"We announced last year that we would be expanding the capacity of our existing plant to 120,000 vehicles annually," a Honda spokesman told Reuters news agency.

But the spokesman said he could not confirm the Tokyo-based company already has a deal to build a second plant with Guangzhou Automobile.

"We have not decided on any new plans," he said.

New plant expected as early as 2004

The Nihon Keizai business daily reported on Friday that Honda plans a second factory with Guangzhou Automobile that will go into operation as early as 2004.

The Chinese carmaker is based in the city of Guangzhou, in the southern province of Guangdong. Guangzhou Auto has made Honda cars like the Accord since 1999. It also now makes the Odyssey minivan.

The new factory would have an annual capacity of about 100,000 cars, according to the Nikkei. The vehicles would probably be subcompact cars with small engines, under 2 liters.

The existing plant expects to produce 59,000 cars this year, but it is ramping up to 120,000 in 2003.

Honda would sell the cars from any new plant in China. But it also reportedly plans to export them, including shipping some back to Japan.

A Hong Kong ownership stake

Honda Motor Co. is the No. 2 car company in Japan. But like all of its large peers, it is looking to China as an increasingly important market and a way of producing cars at low cost.

Hong Kong-based Denway Motors Ltd. owns 95 percent of Guangzhou Auto.

Suzuki told CNN on Monday that it is expanding production at its joint venture in the city of Chongqing (full story).

Honda's main rival, Toyota Motor, said on Thursday that it is in talks on a joint venture with FAW Group Corp., China's largest car company. Toyota is Japan's largest car company.

The two car giants are discussing linking on a high-end car, with FAW -- or First Automotive Works -- Group already making the Hong Qi sedan, popular with executives and dignitaries (full story).

Japan's No. 3 car producer, Nissan Motor Co., is in talks to close a deal with China's second-largest car company, Dongfeng Motor Corp.

Japan's No. 4 in talks

Lastly, Japan's No. 4 car company, Mitsubishi Motors Corp., said Tuesday it would make four-wheel drive vehicles at DaimlerChrysler's joint venture in China.

China is likely to lower import tariffs on car parts as a result of joining the World Trade Organization late last year. The cost of labor and land are cheaper in China than Japan, though countries such as Thailand can be even cheaper as a car-production base.

In Tokyo, Honda Motor stock is up 2.47 percent at 5400 yen on Friday afternoon, on a day Asian stocks are sharply lower on a technology slide (full midday roundup).

Denway Motors stock is down 1.1 percent at HK$2.325 at the noon break in Hong Kong.




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