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Electric cars in China

Honda puts winning formula to work with China's CATL

Long experience with Chinese partners will help in tie-up with battery leader

A Honda Li Nian EV concept car is displayed during a media preview at the Auto China 2018 motor show in Beijing on April 25.   © Reuters

TOKYO -- Honda Motor has picked China's fast-growing electric battery king Contemporary Amperex Technology (CATL) as a partner to develop an electric vehicle.  While many Japanese companies remain skeptical of CATL, the world's largest battery maker, Honda's decision came as no surprise given the automaker's long history of working closely with Chinese partners. 

Honda announced last week that the two companies will collaborate to develop batteries and related technologies for Honda's mainstay electric models. Those models, key to its global strategy, will be introduced in China and elsewhere by the first half of 2020.

Honda is used to cooperating closely with Chinese companies in the motorcycle business. In the late 1990s, Honda's motorcycle business was doing well in China, but it was assailed by the rise of low-priced copies from local manufacturers. The automaker sought to shut their production down by working with the authorities, but the counterfeits made their way into Southeast Asia and Africa in large volumes and took over those markets.

Honda then decided to take the bold step of setting up a joint venture with one of the makers of the replicas in 2001, figuring that working with a capable manufacturer and turning it into an ally would be more beneficial than fighting it.

Many Japanese businesses are still skeptical of the fledgling CATL, which was founded in 2011. "It's somehow worrying that the company is growing so quickly," said an executive at a big chemical company that supplies Japanese battery maker Panasonic.

But Honda has been proactively employing local technologies and equipment for production abroad. 

The company was among the first Japanese manufacturers to set up a joint venture with a Chinese partner. In 1998, the automaker created Guangzhou Honda -- now named GAC Honda Automobile -- with GAC Motor. GAC Honda's production facilities feature equipment symbolic of Honda's approach to China: large locally produced press machine tools, first introduced in 2006.

The Chinese new-auto market that year totaled more than 7 million units, surpassing Japan and becoming the world's second-largest auto market. But using machine tools from Japan, Europe and the U.S. was the norm.

Sho Minekawa, a Honda executive who headed the joint venture at the time, forced through the adoption of the press equipment despite strong opposition inside the company. But today, most of the parts and equipment used to build autos at GAC Honda are locally procured. 

China will no doubt become the primary battleground for next-generation vehicles. Honda aims to work with Chinese partners on connected cars and autonomous-driving technologies as well. Still, how much of its own intellectual property to disclose to its Chinese partners continues to be a tricky question.

As was demonstrated earlier this year -- when Honda was forced to suspend sales of its popular CR-V sport utility vehicles after Chinese authorities rejected its recall plan -- China is a market heavily influenced by the government. As Beijing pushes the adoption of electric and other next-generation vehicles, working with local companies has become even more important.

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