TOKYO -- Honda Motor has decided to transfer some production from its U.K. factory, to be closed in 2021, to Japan, Nikkei has learned.
As the U.K. is set to leave the European Union, the British and Japanese governments are in the final phase of talks over ending auto tariffs under a trade deal.
Honda, which has increased the ratio of overseas production to reduce foreign exchange risk, plans to increase use of domestic plants in anticipation of a potential bilateral agreement on auto tariffs.
Honda plans to move production of Europe- and Japan-bound Civic passenger cars at its U.K. plant in Swindon to a factory in Yorii, northwest of Tokyo, in 2021.
Honda has already decided to close the U.K. plant in 2021 in response to a slumping European economy and the U.K.'s exit from the EU.
The current tariff on vehicles to EU countries from Japan is 7.5%, but as the U.K. has decided to leave the EU, the rate would rise to 10% unless Tokyo and London reach a trade deal.
The Japanese and U.K. governments are seeking to sign an agreement as early as possible. If the agreement is reached, the tariff will be lowered in phases to zero by 2026.
A total of 11% of the Swindon plant's output went to the U.K. market in 2019 while 6% was shipped to Japan. Honda had earlier revealed a plan to move the facility's production destined for the U.S. market, where nearly 70% of its 2019 output was shipped, to the U.S. But it had not revealed where it planned to move production for the Japanese or British markets.
Honda decided on the Yorii plant in view of the potential removal of tariffs and for the goal of raising the Japanese factory's utilization rate.
Annual new car sales in the U.K. total 2.3 million vehicles, making it the second-largest market in Europe after Germany. Vehicles made by Japanese manufacturers, which have long operated in the country, account for nearly 20% of the U.K. market.
In 2019, Honda sold 40,000 cars in the U.K., representing one-third of its unit sales in Europe.
Honda's move follows Nissan, which in 2019 canceled a plan to manufacture its X-Trail next-generation SUV at a U.K. plant, deciding instead to assemble the model at its Kyushu factory. A Japan-U. K. trade deal, if it materializes, would support Japanese automakers that have decided to shift production from the U.K. to Japan.