Honda: Taking NAC MG’s lead in the UK?

Clive Goldthorp

The European market MG-badged, facelifted, Roewe 550 will be built at Longbridge. Economics will be have been a major factor in this decision. Did Honda come to the same conclusion?

THE real significance of Honda Motor Company Limited (Honda) President and CEO Takeo Fukui’s recent announcement that the new MY09 Honda Jazz will be built at Honda of the UK Manufacturing Limited’s facility in Swindon seems to have been rather lost amidst all the doom and gloom generated by the impact of the deepening economic recession on the global Automotive Industry.

The new Jazz should start rolling off the assembly lines at Swindon towards the end of 2009 and will add a further 240,000upa to the facility’s present annual production capacity of 238,000 units (currently comprised of the CR-V and Civic models) – that has to be encouraging news for the UK’s increasingly beleaguered Automotive Industry…

Interestingly, though, Takeo Fukui does not seem to have given any public explanation of why Honda decided against building European and UK bound versions of the new Jazz at the facility operated by Honda Automobile (China) Company Limited (the JV between Honda Motor Company Limited, Guangzhou Automobile Industry Group Company Limited and Dongfeng Motor Group Company Limited) at Guangzhou in China’s Guangdong Province – all versions of the run-out MY08 Honda Jazz range sold in Europe and the UK during the past year were reportedly sourced from that plant.

However, AROnline reckons that a key factor in Honda’s decision may have been the significant risk of further fluctuations in the price of crude oil and their adverse effect on the cost of transporting cars from China to Europe and the UK. The cost of a barrel of crude oil may have dropped from a high of $150 a barrel last July to nearer $60 a barrel now but, as Automotive News Europe’s Editor, Arjen Bongard, said in an article earlier this week (see, Don’t count on cheaper oil) ‘the worst thing the industry can do is count on cheaper gasoline following the recent slide in oil prices.’

Bongard observed that the global economic slowdown and concerns about the global financial crisis were both reducing demand for oil before adding ‘but make no mistake: this is a temporary phenomenon. The Paris-based International Energy Agency warned earlier this month that oil prices will jump above $100 a barrel as soon as the world economy starts to improve again. By 2030, the IEA predicts, a barrel of oil will cost more than $200.’

AROnline reckons that a key factor in Honda’s decision may have been the significant risk of further fluctuations in the price of crude oil and their adverse effect on the cost of transporting cars from China to Europe and the UK

AROnline readers who follow the above link to Bongard’s article will note that, although he then outlines what action the Automotive Industry should take in order to prepare for such a scenario in terms of technological developments, he does not discuss the effect that a crude oil price of even $100 a barrel would have on most OEMs’ logistical costs – nearly all would surely have to review which models were made in which countries…

Honda may or may not have given weight to the likelihood of the cost of crude oil increasing to, say, $100 a barrel again in the not too distant future when deciding to build the new Jazz in the UK as opposed to China. However, AROnline has good reason to believe that such strategic thinking probably does underpin SAIC Motor Corporation Limited’s decision to build the new four model range of MGs at Longbridge – we met Gary Hagen, NAC MG UK Limited’s Sales and Marketing Director, there in August and, during our interview, he commented: ‘Right now, if anything, the financial case for building cars here is better than it has ever been – with the price of fuel being what it is, the cost of shipping cars from China has become a very real factor.’

SAIC Motor/NAC MG may, on the other hand, be taking a lead from Honda with the design of their forthcoming B-segment supermini. AROnline understands from one source that the successor to the MG ZR has an ‘upright’ appearance – we therefore wonder how that new model will compare with the MY09 Honda Jazz and how the Designers and Engineers at SAIC Motor UK Technical Centre Limited will reconcile such an appearance and stance with the MG marque’s traditional attributes.

MG enthusiasts everywhere will, in any event, doubtless be hoping that the current economic downturn does not deter SAIC Motor/NAC MG from implementing their plans to build the new MG range at Longbridge. Hopefully, by the time that all four of the new models are launched, the global economy will be back on the road to growth…

(Editor’s Note: Any AROnline readers wishing to discover more about the Honda Automobile (China) Company Limited JV in Guangzhou should read’s recent Honda plant hits milestone as markets change article while that website’s latest Company Snapshot on Honda can be found here)

Clive Goldthorp

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