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Honda plans China factory expansion to make 120,000 more EVs

$462m investment in Guangzhou will boost automaker's Chinese capacity 10%

A Honda dealership in Guangzhou: The automaker will boost production of electric and plug-in hybrid vehicles in China. (Photo by Takashi Kawakami)

GUANGZHOU -- Honda Motor plans to ramp up its capacity to build electric cars and other so-called new-energy vehicles in China, Nikkei has learned, as the Japanese automaker aims to catch up with rivals in this segment of the world's largest auto market.

Honda will invest about 3 billion yuan ($462 million) through a joint venture to expand an existing factory in the southern city of Guangzhou.

The move by Honda, which has seen its Chinese sales grow in recent years, adds to the rising competition in new-energy vehicles, a segment being pushed by China's government. Both foreign and domestic brands are vying for market share.

The plans, which were revealed in a bid application filed by Guangqi Honda Automobile with the municipal government, call for an additional annual production capacity of 120,000 vehicles to go into operation as early as February 2024.

Encompassing about 186,000 sq. meters, the factory expansion is slated for construction from October. The additional capacity is expected to be dedicated to new-energy vehicles, but specific production models have not been disclosed.

New energy-vehicles comprise battery electric cars, plug-in hybrids and fuel cell electrics.

The new production facility in Guangzhou is expected to raise Honda's annual auto production capacity in China to 1.61 million vehicles -- about 10% higher than the current level.

Guangqi Honda has four plants in Guangzhou in Guangdong Province and a production capacity of 770,000 vehicles per year. Dongfeng Honda Automobile, another Honda joint venture, operates three plants in Wuhan in Hubei Province with an annual production capacity of 720,000 autos.

Honda has posted two consecutive years of record new-car sales in China, totaling about 1.63 million vehicles in 2020 -- up 5% from the previous year. Total sales from January to July this year soared 20% to about 890,000 from the same period last year. But sales have slowed for three consecutive months through July, dipping below the previous year's level.

Competition from Chinese brands is intensifying as they focus on selling new-energy vehicles, and it is compounded by the semiconductor shortage.

Honda has expanded its sales of plug-in hybrid vehicle, and it announced at Auto Shanghai in April that it would introduce in China 10 new EV models under its own brand within five years. To date, the company has only sold such cars under its joint-venture brands.

The auto show in April featured a prototype of Honda's first own-brand electric sport utility vehicle in China, which will go on sale in spring 2022.

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