China Watch : Honda lifts local content of Jazz built in China

Kevin Huang, Automotive News China, 19th November, 2008


GUANGZHOU — Honda Automobile (China) Co., which produces the Jazz small car in the south China city of Guangzhou for export, has lifted the local content of the car from 60 to 90 percent in value.

Masaya Nagai, president of the Honda subsidiary in China, says the local content increase cuts the car’s production costs, offsetting pressure brought by the appreciation of the yuan and rising costs of labor and raw materials. Nagai made the remarks in Guangzhou last week on the sidelines of a ceremony celebrating the export of the 100,000th car to Europe by his company.

To date, Honda Automobile (China) only sells the Jazz to Europe. The car has entered 21 European countries including Germany, France, Belgium and Russia.

Nagai says his company lifted the local content rate by 30 percent about three months ago when it started producing the new generation of the Jazz. “The parts we are sourcing now for the new Jazz in China are almost all from the existing suppliers of the Fit built by Guangzhou Honda,” Nagai says.

Production costs of the Jazz in China and Japan are almost the same at present. The parts (for production in Britain) will probably be shipped from China and Japan

Guangzhou Honda Automobile Co. is Honda Motor Co.’s China joint venture with Guangzhou Automobile Industry Group Co. The company is producing several Honda models for China market, including the Fit subcompact. Fit and Jazz are the same Honda models.

Nagai says his company imported many parts from Japan in the past. Now that Guangzhou Honda has redesigned some parts for the new Fit sold in China in line with the European standards, the Fit and Jazz built in China can share more parts.

Earlier this year, Honda Automobile (China) started sourcing in China parts including wheel hubs, headlights and steel plates for some body parts of the Jazz, says Nagai. These parts were previously imported from Japan. Parts that still need to be sourced from Japan are mainly components for engines and transmissions, according to another Honda Automobile (China) executive who requests to be anonymous.

Honda Automobile (China) exported about 43,000 units of the Jazz last year to Europe and the target for this year is 45,000 units, says Nagai. The cars carry 1.2- or 1.4-litre gasoline engines. His company currently has an annual output capacity of 50,000 units, but can be expanded to 60,000 units by speeding up production, and to 100,000 units by extending or adding production lines, he adds.

Nagai says Honda is considering expanding his plant’s capacity and adding new models to its production line. But he says the company will be “very careful” with capacity expansion in the face of the slowdown in auto sales worldwide, the appreciation of the yuan and rising costs of labour and raw materials in China.

“Production costs of the Jazz in China and Japan are almost the same at present,” Nagai says. He also says his company has stopped producing the right-hand drive Jazz for the British market earlier this year, adding that Honda’s plant in Britain will start producing the Jazz next year. “The parts (for production in Britain) will probably be shipped from China and Japan,” he adds.

[Source: Automotive News China]

Clive Goldthorp

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