Guangqi Honda Automobile Company today announced plans to build a third production line at its existing ZengCheng Plant. The automobile production and sales joint venture of Honda in China will begin construction at the end of this year, and the line will become operational in 2014. The result will be an initial annual production capacity of 120,000 units.
GHAC said at the Beijing Motor Show that it is planning to expand the capacity up to 240,000 units in the future. GHAC is also planning to build a new engine plant in time for the start of production on the third line. The total investment for the third line and the new engine plant is expected to be 3.56 billion R.M.B. or ~46 billion yen at 12.92 yen:1 R.M.B.
During 2011 Honda sold 618,000 cars in China last year, dwarfed by market leader General Motor’s 2.55 million and Volkswagen Group’s 2.26 million. Among the Japanese Big Three, Nissan in China is twice as big as Honda and Toyota is 40% larger in terms of vehicle sales.
“We’ve been too cautious in China, this is undeniable,” said Kuraishi Seiji, who is in charge of Honda’s China operations.
All major automakers have announced ambitious expansion plans in China, the world’s largest auto market. However, in 2011 the Chinese auto market only grew by 5%, by far the lowest growth rate of the 21st century, as the communist central government deliberately slowed the economy in an attempt to fight inflation.
Honda also said that all Honda vehicles sold in China would shift to new engines that apply so-called Earth Dreams Technology, with the engines of all Honda vehicles replaced by the end of 2015. Globally Honda is attempting to be the most fuel-efficient automaker in all its segments.
This year, Honda will introduce three Hybrid models to the Chinese market - CR-Z, Insight and the Fit. Honda will also eventually introduce to the Chinese market a new hybrid system for mid- to large-sized vehicles, as well as a plug-in hybrid system.
When the third line at Guangqi Honda becomes operational in 2014, GHAC’s overall annual automobile production capacity will be increased from the current 480,000 units to 600,000 units.
In the meantime, Dongfeng Honda Automobile Co., Ltd., another Honda automobile production and sales joint venture in China, is scheduled to begin production at its newly built second plant in July of this year, increasing the company’s annual production capacity to 360,000 units by 2013.
With these capacity expansion measures, Honda’s overall annual automobile production capacity in China will increase from the current 770,000 units to 1.01 million units in 2014.