Honda to boost its capacity overseas

Honda on Wednesday highlighted the contrasting fortunes it faces at home and abroad by announcing an overseas expansion while delaying the domestic launch of a premium brand.

Japan’s second largest carmaker said it planned to significantly boost capacity to meet strong growth in Asia and Europe but its Acura brand would not launch in Japan for at least two years, as the domestic market had turned sour.

“The market has become slightly worse than we had expected,” said Takeo Fukui, president, on Wednesday.

Honda has experienced buoyant demand overseas, with global sales expected to achieve another record this year of 3.93m units, topping last year’s 3.55m.

The manufacturer is building a second vehicle factory in Thailand, which would double production capacity there to 240,000 units.

The new plant, to come on stream in the latter half of 2008, comes on the heels of a new engine plant that began production this April and will follow the opening of a replacement parts plant within the next few months.

In India, Honda is doubling production at its existing plant where it makesthe Civic.

Output is expected to grow from 50,000 to 100,000 units there and it is opening a new plant with a production capacity of 90,000 units in 2009.

By 2010, Honda expects production capacity in India to exceed 150,000 units.

In Europe, where Honda led the main carmakers in sales growth in the first half, it is expanding production of the Civic at its plant in Turkey from 30,000 to 50,000 to bring total European production to 300,000.

In North America, Honda is expanding production capacity to 1.62m units by next autumn.

Honda, which has been manufacturing vehicles in the US for 25 years, produces 80 per cent of vehicles sold in the US in North America.

However, the growth of Honda’s business overseas is in contrast to the situation at home where the Japanese market has turned sour again after several years of sluggish growth.

“I don’t think the market environment will change much in two years,” said Mr Fukui, indicating that the two-year delay to the Acura could be extended.

Koji Endo, auto analyst at Credit Suisse Securities in Tokyo, said: “With the population declining and especially with the large number of young people without stable work . . . the domestic car market is seeing a structural decline.”

Honda’s domestic sales fell 5.6 per cent in the first half of 2007 and 8.5 per cent if minivehicles are included – due to a weaker line-up of minivehicles compared with the previous year.

Mr Fukui said Honda would strengthen its mini­vehicle business by boosting manufacturing at Yachiyo, its minivehicle subsidiary.

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