Honda to expand production in China with new factory

TOKYO • Honda Motor has revived plans to expand production in China, beginning work on a new plant this year that will start operating in 2019.

The factory will have an initial annual capacity of 120,000 vehicles and could eventually produce 240,000 units a year, Mr Chen Binbo, executive vice-president of Honda's China joint venture, said yesterday in a phone interview.

Honda had said last year that it was delaying construction of a US$822 million (S$1.1 billion) plant in Wuhan as industrywide demand slowed.

Honda and partner Dongfeng Motor Group are experiencing explosive growth in China with sales for their joint venture soaring 48 per cent so far this year due to the popularity of the XR-V sport utility vehicle (SUV) and the recently launched Civic sedan.

At the same time, the venture, Dongfeng Honda, is nearing its capacity at its two factories, targeting sales of 450,000 vehicles for this year - not far off the current capacity limit of 480,000.

Industry sales began to recover in the fourth quarter of last year, following the introduction of a tax cut on purchases of vehicles with smaller engines. The tax cut is scheduled to expire on Dec 31.

Passenger vehicle sales have surged 15 per cent to 16.75 million units in the first nine months of this year. Honda's new models for China this year include an updated Civic compact and all-new Avancier and Acura CDX SUVs.

The new factory will be Honda's seventh in China.

Honda also has a joint venture with GAC Group called Guangqi Honda, which has three plants. The Japanese automaker also has a separate plant for exports.

Honda said in April that it was looking to boost car sales in China to 1.07 million this year. It sold 1.01 million vehicles in 2015, a 33 per cent jump over the previous year.

Car sales in China strengthened in September for the fifth consecutive month, rising to 31/2-year high.

Separately, Hyundai Motor, which counts China as its biggest market, said it planned to introduce a new SUV model to its plant in Cangzhou in northern Hebei province. The Seoul-based carmaker began producing the Verna Yuena sedan at the factory on Tuesday. The plant will boost Hyundai's annual output in China to 1.65 million vehicles by 2018.

BLOOMBERG, REUTERS

A version of this article appeared in the print edition of The Straits Times on October 19, 2016, with the headline 'Honda to expand production in China with new factory'. Print Edition | Subscribe