Honda (2): further localization of its overseas operations

Plans to sell 1.43 million vehicles in the US, 750,000 in China in 2012

2012/02/13

Summary

 Our previous report "Honda (1)" of January 30, 2012, contained Honda Motor's (i) sales increasing plans in Japan and (ii) the direction of product planning and powertrain plans.

 This report "Honda (2)" contains Honda's (i) initiatives toward localization of production, development and purchasing activities and (ii) an overview of its product planning and sales plans for 2012 in its largest market, North America, and other key areas.


 Honda's overseas operations are moving toward localization of development and purchasing activities as well as localization of production of assembled vehicles. As for emerging markets where growth is promised, Honda plans to develop specifications based on local standards and needs, increase the local content rates and introduce cost competitive products.

 As a first step under those plans, Honda will start simultaneous model development in six key areas of the world (Japan, North America, China, Asia Pacific, South America and Europe). The first model to be developed will be the next Fit scheduled for launch in 2014. The basic design will be used in common but technical details and purchasing will reflect local needs and conditions.

 Honda will enhance its structure in China that will allow local workers to develop products that meet the needs of the Chinese customers. According to Honda, its entry car, Brio, for emerging markets that were released for sale in 2011 in Thailand and India were built using different drawings to meet local conditions.

 As for the Acura brand, Honda announced its development and production operation will take place in North America which is its largest market.


 The Great East Japan Earthquake of March and floods in Thailand in October 2011 had a serious impact on Honda. The resulting stock shortage caused a decline in Honda's vehicle sales in 2011 from 1,230,000 units in 2010 to 1,147,000 in the United States, from 647,000 to 618,000 units in China. Anticipating that its production and stock will be normalized in 2012, Honda plans to launch new models vigorously and sell 1,430,000 units in the United States (up 25%), 750,000 units in China (up 21%).

Related Reports:  Tokyo Motor Show 2011: Japanese OEMs (1) : January 2012
Tokyo Motor Show 2011: Japanese OEMs (2) : January 2012
Honda (1): mini vehicles and HV sales increase in Japan : January 2012
Detroit Auto Show 2012: Japanese OEMs : January 2012


Developing new models in six key regions of the world: To best meet local needs

 Starting with the next Fit scheduled for market launch in 2014, Honda will set up development operations in six key regions of the world as needed to better meet local needs while reducing the impact of the yen's appreciation and increasing price competitiveness. Honda will enhance its developing and purchasing functions in the six key areas, compare materials and specifications of competing models in various markets of the world, and make necessary efforts to best meet local needs. As for parts procurement, Honda will reduce parts supply from Japan substantially and buy more parts from local suppliers.

 Honda plans to use its plant in Mexico that will start operations in the first half of 2014 as a parts supply hub.

Developing new models in six key regions starting with the next Fit

 Starting with the next model of Fit slated for launch in 2014, Honda under a new policy will develop new vehicle models simultaneously at its developing and purchasing sites located in six regions in the world (Japan, China, Asia Pacific, North America, South America and Europe).While the key components such as the vehicle frames and engines will be used in common, detail specifications and parts suppliers will be determined by the local development division according to the local needs.
 Honda will reduce parts supplies from Japan significantly and uses more local parts of high cost competitiveness that meet regional needs. Honda will enhance the development function of its overseas operation sites, and its key suppliers in Japan reportedly will increase their development personnel overseas in response to Honda's policy.

Source: Nihon Keizai Newspaper 2011.9.8/2012.1.1/2012.1.25
(Note) Honda used to refer to its "six key regions of the world" structure but its operation was reportedly centralized in North America. Honda is now determined to strengthen the six region structure in the true sense and enhance its operations in each of them.

New plant in Mexico to be the hub for parts supply
 Honda's new plant in Mexico, scheduled for production starting in 2014, will also be Honda's supply base of parts to production sites around the world as are other main plants in Japan and Thailand. Modeled after the Thai plant, the new plant will become one of the core plants in Honda's international mutually complementary structure to supply parts to other plants in North America, Brazil, Japan and other parts of Asia.
 Honda will be able to avoid the risk of one of the plants being forced to shut down after a natural disaster or other accidents, while lowering production costs and increasing competitiveness on a global scale.

Source: Nikkan Jidosha Newspaper 2012.1.13

 

 



Model plans for North America: Launching new models vigorously since the end of 2011

 Honda has renewed and will renew three prominent Honda brand models including the Civic in April 2011, CR-V in December 2011 and the Accord in the fall of 2012 (these three models account for approximately 60% of the Honda brand vehicle sales in the United States). Next, the Fit which is to be developed in six key regions will be introduced in MY 2014.

 Among the Acura brand vehicles, Honda will launch an entry model ILX Concept and the second-generation Acura RDX in the spring of 2012. In addition, Honda reportedly will launch a larger-sized successor to the flagship car RL (Legend in Japan) in MY2013. Honda announced the development of the successor to the NSX-which had been suspended-will be resumed for market launch by the end of 2014.

 Honda will produce three Acura brand models (ILX, RDX and NSX), announced at the 2012 NAIAS, in the United States. Honda regards North America as the development and production base of the Acura brand cars and plans to renew all models within three years from now.

 In addition to the three hybrid vehicles (HV) already in the market (Civic, Insight and CR-Z), Honda will fit the IMA hybrid system in the ILX Concept as well as a PHV system and a two-motor hybrid system in the new Accord in 2012 and 2013, respectively.

NSX Concept exhibited at the 2012 NAIAS
NSX Concept exhibited at the 2012 NAIAS (to be developed and produced in the US)

Honda's product plan in North America

MY 2012 MY 2013 MY 2014 MY 2015
Honda New Civic (Note 1),
New CR-V (Note 2)
Fit EV,
Next Accord (Note 3)
Next Fit,
Next Pilot
Next Insight
Acura ILX concept (Note 4),
Next RDX (Note 5),
Next RL (Note 6)
Next TL,
Next MDX
Next NSX (Note 7)
Source: Honda press releases 2011.11.28/2012.1.10, Automotive News 2011.8.1/2011.11.21/2012.1.16
(Notes) 1. The new Civic released for sale in 2011 was originally designed as a larger car with more upscale features, but its wheelbase was decreased in the middle of the economic crisis of 2008 (the overall length and width remained unchanged). The car was characterized by high fuel efficiency, compact body and roominess along with cost reduction. However, it fell short of potential customers' expectations for reasons that the instrument panel, center console and other interior designs were less attractive to them than the competitions. As a result, it is said Honda has scheduled a midcycle change in 2013-earlier than a normal interval.
2. The new CR-V was released for sale in December 2011. The overall length was reduced by 1.0 inch (2.54 cm) and the overall height lowered by 1.4 inches while increasing the roominess. Its interior trim is made of a finer quality material than the Civic that shares the platform. The 2.4-liter engine remains the same as on the previous model but its fuel efficiency has been improved from 21 to 23 mpg city and from 28 to 31 mpg highway after reducing the body's weight and the engine's friction.
3-1. The new (ninth-generation) Accord Coupe Concept was exhibited at the 2012 NAIAS and Honda will launch the Accord series including the sedan in the fall of this year. Three types of powertrains will be used, including the 2.4-liter direct-injection engine, the V6 engine (in Honda's first combination with the 6-speed AT) and the two-motor PHV, all expected to achieve class-leading fuel efficiency level.
3-2. The PHV is fitted with a 2.0-liter Atkinson cycle engine, 6kWh lithium-ion battery, a 120kW motor and the E-CVT. It delivers an EV driving range of 10 to 15 miles on paved streets and the maximum speed is 62 mph. An engine-only mode is available to increase fuel efficiency on expressways.
4. The ILX exhibited at the 2012 NAIAS is based on the Civic and represents the first compact segment model under the Acura brand since RSX was discontinued in 2007. Three types of powertrains include the 2.0-liter direct-injection engine, 2.4-liter engine and Acura-first HV fitted with a 1.5-liter engine and the IMA system. Produced at the plant in Indiana, US (Honda's first HV produced outside of Japan) with the annual sales target set at 40,000 units.
5. The Acura RDX is a Civic-based small CUV. The 2.3-liter turbo-engine of the previous model has been replaced by a V6 3.5-liter engine to deliver stateliness, driving performance and fuel efficiency expected of a luxury SUV.
6. Honda will launch in the fall of 2012 the successor to the Acura brand flagship car RL. Unlike the present model positioned as rivals to the Mercedes-Benz E-Class or BMW 5 Series, it is said the new model will feature a cabin space comparable to that of the BMW 7 Series and agility comparable to that of the 5 Series. It will most likely be fitted with an electric SH-AWD.
7-1. Honda announced at the 2012 NAIAS that the successor to the NSX was in the process of development and exhibited the concept vehicle. It is fitted with an electric four-wheel drive system with a mid-mounted V6 direct-injection engine and DCT (Dual Clutch Transmission) with a built-in motor to drive the rear wheels. The front wheels are driven by two independent motors. Developed in the United States and produced on the advanced production line at the Ohio plant in the US. Will be sold first in the United States through the end of 2014 after which the car will be sold globally in other markets in phases.
7-2. In December 2005, Honda announced a plan to develop the successor to the NSX fitted with a V10 engine, but the announcement was withdrawn. According to Honda, the Acura brand is aimed to be a "Smart Luxury" aligned with the change of customer needs and technological evolution.

 



Increasing production in North America while decreasing exports from Japan

 As much as 85.1% of the vehicles that Honda sold in the United States in 2011 were produced in North America. Honda plans to increase production in North America even further.

 Production of the CR-V, currently exported from Japan, will be transferred in part to the plant in Ontario, Canada in 2012. Production of the MDX at the Ontario plant will be transferred to the Alabama plant in 2013. These moves will help increase the efficiency of production in North America and, at the same time, reduce exports from Japan and mitigate the impact of the yen's appreciation.

 The Acura ILX Concept slated for launch in the spring of 2012 will be produced at the Indiana plant in the US.

 The new plant in Mexico will start operating in the first half of 2014 and produce small vehicles at the annual capacity of 200,000 units.

 In 2012, Honda started exporting the China-made Fit to Canada.

Enhancing overseas production related to North American business

Present Planned
Ontario plant,
Canada
Producing Civic and MDX. Part of production of the CR-V currently exported from Japan will be removed in 2012.
Production of the Acura MDX will be transferred to the Alabama plant in 2013.
(Note) Ontario plant specializes in producing four-cylinder engine vehicles.
Alabama plant,
US
Producing Odyssey, Pilot,
and Ridgeline.
Production of the MDX will be removed from the Ontario plant in 2013.
(Note) Alabama plant's capacity will be increased from 300,000 to 340,000 units at the cost of nearly US$300 million. The plant is producing V6 engine vehicles.
Indiana plant,
US
Producing the Civic. Starting production of the Acura ILX Concept, sharing the platform with the Civic, in 2012 at the scale of 40,000 units a year.
New plant,
Mexico
Producing small vehicles in the first half of 2014 with an annual capacity of 200,000 units.
Honda Automobile
(China)
(Exporting the Fit from
Japan to North America
including Canada)
Exporting the China-made Fit (Jazz) to Canada since January 2012 (approximately 6,000 units a year).

Source: Honda press release 2011.8.13, Automotive News 2011.12.19

 



US market: Plans to sell 1.43 million vehicles in 2012, up 25%, after normalization of stock and production

 The US market of light vehicles in 2011 rose 10.3% to 12,780,000 units. Honda's sales in the US, however, declined from 1,230,000 units to 1,147,000 units and its market share in the US market of light vehicles fell from 10.6% to 9% because of the stock shortage after the Great East Japan Earthquake of March and floods in Thailand in the fall of 2011.

 Among Honda's main models, unit sales of the Accord fell from 283,000 units in 2010 to 236,000 units in 2011, and those of the Civic fell from 260,000 units to 221,000 units.

 Honda will normalize its stock in North America by March 2012 and resume full-capacity production at its plants in North America in April at the latest. Honda plans to launch new models vigorously starting in 2012 and sell 180,000 units of the Acura brand cars, up 46% from 2011, and 1,250,000 units of the Honda brand cars, up 22%, in 2012. This corresponds to a total of 1,430,000 units, up 25%, for Honda as a whole in the US.

Honda's unit sales by model in the US (Light Vehicles)

2007 2008 2009 2010 2011 Plan
for 2012
NSX 2 0
RL 6,262 4,517 2,043 2,037 1,096
RSX 296 1
TL 58,545 46,766 33,620 34,049 31,237
TSX 33,037 31,998 28,650 32,076 30,935
Acura car 98,142 83,282 64,313 68,162 63,268
MDX 58,606 45,377 31,178 47,210 43,271
RDX 23,356 15,845 10,153 14,975 15,196
ZDX 0 0 79 3,259 1,564
Acura truck 81,962 61,222 41,410 65,444 60,031
Total ACURA 180,104 144,504 105,723 133,606 123,299 180,000
Accord 392,231 372,789 290,056 282,530 235,625
Crosstour 28,851 17,974
Civic 331,095 339,289 259,722 260,218 221,235
CR-Z 0 5,249 11,330
FCX 10 11 5 17 2
Fit 56,432 79,794 67,315 54,354 59,235
Insight 3 0 20,572 20,962 15,549
S2000 4,302 2,538 795 85 5
Honda car 784,073 794,421 638,465 652,266 560,955
CR-V 219,160 197,279 191,214 203,714 218,373
Element 35,218 26,447 14,884 14,247 11,534
Odyssey 173,046 135,493 100,133 108,182 107,068
Pilot 117,146 96,746 83,901 102,323 116,297
Ridgeline 42,795 33,875 16,464 16,142 9,759
Honda truck 587,365 489,840 406,596 444,608 463,031
Total HONDA 1,371,438 1,284,261 1,045,061 1,096,874 1,023,986 1,250,000
American Honda Motor 1,551,542 1,428,765 1,150,784 1,230,480 1,147,285 1,430,000
Honda's market share 9.6% 10.8% 11.0% 10.6% 9.0% 10.6%
Total US Market 16,154,064 13,245,718 10,431,509 11,590,274 12,778,885 13,500,000
Source: Automotive News 2009.1.12/2011.1.10/2012.1.9
(Notes) 1. Honda's market share of 10.6% in 2012 is an estimate based on Honda's sales plan and its forecast of the US market.
2. Major OEMs estimate the total sales for light vehicles in the United States in 2012 to be 13.5 to 14 million units primarily on account of the gradual recovery of economy and the normalization of production and stock of Honda and Toyota vehicles. The estimates by OEMs other than Honda include 13.5 to 14 million units (GM, VW), 13.6 million units (Toyota), 13.2 to 14.2 million units (Ford) and 13.8 million units (Chrysler).

 



Brazil: Reportedly investing approximately 43.6 billion yen to buy more local parts

 In 2010, Honda produced 131,000 units of the Fit, City and Civic in total at its plant in Brazil and sold 130,000 units including the imported CR-V (Honda produced 75,000 units and sold 87,000 units in January to November 2011).

 Honda reportedly will invest 1 billion Reals (approximately 43.6 billion yen) by 2014 for plans to increase the local content ratio (approximately 73% at the present) and to develop new models.

 



Europe: Boosting European business with the new Civic and the new CR-V

 Honda sold 391,000 vehicles in Europe in FY2007 but its sales from April to September 2011 remained low at 75,000 units (compared to 101,000 units sold in the same period a year earlier).

 In December 2011, Honda's plant in the UK began production of the new Civic designed exclusively for the European markets. The current CR-V will be renewed also in 2012 (to be released in the fall) after which production at the British plant will nearly double from the quantity in 2011 to 180,000 units. Honda will boost its European business with the new Civic and the new CR-V.

 The new 1.6-liter diesel engine, officially announced in November 2011, will be fitted first in the Civic sold in Europe.

 It is said that Honda is negotiating with the Russian government about the feasibility of knock-down production in Russia.

 



China: Enhancing local development and purchasing functions with plans to sell 750,000 vehicles in 2012

 Honda's vehicle sales in China fell from 647,000 units in 2010 to 618,000 units in 2011 marking the first year-on-year decline since Honda's production in China began in 1999. The decline is due partly to the short supply of parts from the quake-struck Japan.

 Honda plans to sell 750,000 vehicles in 2012, up 21% from the quantity sold in FY2010. Toward this end, Honda will launch the new Accord and the large-sized minivan, Elysion, as well as the second model of "Everus" Chinese original brand following the first model of "Everus SI".

 Honda has established R&D and product planning functions in China to further strengthen the product development activities primarily by Chinese staff to introduce vehicles that meet the needs of the local customers.

 Honda will also strengthen its parts procurement function in China to raise the quality and service levels and use the Chinese parts in other regions on a global scale.

Honda's production and sales in China

2007 2008 2009 2010 2011 Plan
for 2012
Production 464,033 518,346 602,455 676,877 647,232
Sales Guangqi Honda 295,299 306,230 365,623 386,031 362,294
Dongfeng Honda 127,042 164,035 210,601 260,600 255,468
Total 422,341 470,265 576,224 646,631 617,762 750,000
Honda Automobile (China) 43,124 45,500 28,299 25,009 24,249
Grand total 465,465 515,765 604,523 671,640 642,011

Source: Honda's press releases 2010.1.25/2011.1.27, MarkLines Data Center
(Note) Honda Automobile (China) produces and sells the export-only model, Jazz (Fit) primarily to Europe. Export to Canada started early in 2012.

 

Producing EVs and HVs in China with plans to produce two-motor type HVs as well

 Demonstration tests of the Fit EV began in November 2011 in Guangzhou in China. Local production of EV by Guangqi Honda is planned to start in 2012 at the earliest.

 As for HVs, Honda plans to start selling the imported Insight, CR-Z and Fit HV in 2012 in addition to the Civic HV that is already sold in China. Honda will also start local production of HVs in China in 2013 if possible with plans to procure key components as well from local suppliers. In addition, Honda reportedly will start local production of the newly-developed two-motor type HV system for mid- to large-size vehicles sometime after 2014.

 



Asia: Starting production of the Brio in Thailand and India

 Honda released for sale the Brio, in May in Thailand and in September in India, which is a small car developed for the entry markets rapidly growing in Thailand, India and other parts of Asia.

 The cars sold in Thailand and India are manufactured using different drawings to best meet local needs. The Thai model complies with the eco-car standards set by the Thai government. The Indian model is built using sheet metal, engines and other parts of high local contents to lower the price to 395,000 rupees (approximately 710,000 yen),

 Production started in Thailand first for convenience sake but the main site of production is said to be India.

Developing and selling the Brio in Thailand and India

BRIO
(Thailand)
Launched
in May 2011
 The Brio is based on Honda's basic approach to "people-first" car design as expressed in the M/M (man maximum, machine minimum) concept calling for maximum space for passengers and minimum space for mechanical components. Its compact body (3610mm long, 1485mm wide, 1485mm high), easy to handle on city streets, nevertheless contains a roomy cabin and self-assertive design. Powered by a 1.2-liter i-VTEC engine.
 Released for sale in Thailand in May 2011 with plans to sell 40,000 units in the first year of launch and to export to neighboring countries as well in the future.
 The Thai model has higher fuel efficiency than 5L/100km, an eco-car standard set by the Thai government (ECE R101, see Note), and environmental performance compatible with Euro 4 emission standards for cars. Sold for 399,900 baht (approximately 1,079,730 yen), the Brio satisfies both of affordability and performances that are sought in the Thai market.
BRIO (India) Launched
in September 2011
 The Indian model is identical to the Thai model in terms of engines, overall length and width and is 1500mm in height. A high local content of sheet metal, engines and other components has led to a low price of 395,000 rupees (approximately 710,000 yen).

Source: Honda's press releases 2011.3.17/2011.9.27
(Note) The five-seat Toyota Prius sold in Europe has fuel efficiency of 3.9L/100km (25.6km/L) when tested using the same standard, harder to meet than the JC08 mode used in Japan.

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