Honda builds new factory in China to tap into booming market
Japan's Honda is building a new factory in China as it looks to reach further into the booming Chinese auto market, though nothing official has as yet been announced. This would also mark a 20% boost from Honda's current Chinese factory capacity of 1.08 million units - it already has several factories in China. Honda, along with its partner Dongfeng Motor Group, is experiencing explosive growth in China with sales for the joint venture rocketing 48% for the year to date, primarily due to the popularity of the XR-V SUV, as well as the recently launched Civic sedan. In China, vehicle sales strengthened in September for a consecutive fifth month, rising to a three-and-a-half year high.

TOKYO: Honda said Tuesday it will build a new factory in China, as the Japanese automaker expands its reach into the world’s biggest vehicle market.

The firm, which already has several factories in China, would build its new plant in the city of Wuhan, a Tokyo-based company spokeswoman said, without supplying further details. Honda confirmed that it was discussing the additional plant in Wuhan with Dongfeng, but that it had nothing official to announce now. A Beijing-based spokesman for Honda said the project had yet to be formally approved by the company or the government.

The plan was initially reported by the Nikkei business daily, which said the venture planned to spend “hundreds of millions of dollars” on the factory. The new factory would be Honda’s seventh in China.

The factory will start operating in 2019, the leading Nikkei business daily said. The plant will be able to produce 120,000 vehicles a year in the beginning, eventually doubling to 240,000 units, according to the report.

That would be roughly a 20 per cent boost from Honda’s current China factory capacity of 1.08 million units, excluding facilities solely for exports, the Nikkei story said.

Honda has three plants in southern Guangzhou and two in Wuhan, in addition to a factory dedicated to exports mainly to the Middle East, Russia and Africa.

Last year, Honda said it would delay building a planned $822 million (Dh3.02 billion) plant in Wuhan owing to an industry wide slowdown.

But it revived the plan as sales began to recover late last year following the introduction of a tax cut on purchases of smaller vehicles, a key business for Honda, reports said.

Honda and partner Dongfeng Motor Group Co are experiencing explosive growth in China with sales for their joint venture soaring 48 per cent for the year to date thanks to the popularity of the XR-V sport-utility vehicle as well as the recently launched Civic sedan.

At the same time, the venture, Dongfeng Honda, is coming close to its capacity limits at its two factories, targeting sales of 450,000 vehicles for 2016 — not far off current annual capacity of 480,000.

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

Auto sales in China strengthened in September for a consecutive fifth month, rising to a three-and-a-half year high.