Honda China (Part 2): Raising production to over 1.5 million units by 2020

Construction begins for Guangqi Honda and Dongfeng Honda expansions

2014/10/09

Summary

Honda's Production Volume by Region This report describes the latest trends in the production efforts of Honda, which is actively strengthening its production capacity in China.


 The production and sales of Honda's vehicles in China had favorably grown until 2010. However, Honda's sales were stagnant  in 2011 and 2012 due to negative factors, including the company's delayed introduction of compact models (whose demand is growing in China), the decline in sales of the company's strategic vehicles (including the Accord), the 2011 great earthquake in Japan and the worsening political relations between Japan and China in 2012. In 2013, the company's production and sales rapidly recovered. Since then, Honda has been actively strengthening its production capacity to catch up with that of Nissan Motor Co., Ltd. and Toyota Motor Corporation, which are ahead of Honda.


 Honda aims to expand its production capacity in China from 890,000 units as of September 2014 to over 1.5 million units in 2020 and to over 2 million units in 2023.


Related Reports:
Honda China (Part 1): Sales target of 1.3 million units in 2015 (Oct. 2014)
◇ Beijing Auto Show 2014:
     (1) Honda unveils Hybrid Concept B and Acura RLX SH-AWD (May 2014)
     (2) Honda: All-new Spirior concept, VEZEL and 3rd-generation Fit (May 2014)
Honda's strategy to expand in Asia by developing cars for local markets (May 2014)
Honda's China production increased to meet 2015 projections (May 2013)



Honda's production capacity

Honda's Production Volume in China
▽Honda's production in China: Recovery trend continues since 2013

 The production volume of Honda's vehicles had been growing favorably from 200,000 units in 2004 to 500,000 units in 2008 and to 670,000 units in 2010. The production of Honda cars, however, fell to 623,000 units in 2012 due to the 2011 great earthquake in Japan and the worsened political relations between Japan and China in 2012. In 2013, the company's production rapidly recovered to 789,000 units.

 

China ranks third after the U.S. and Japan in Honda's global production

 In recent years, China is becoming increasingly important to Honda. In 2013, Honda produced about 790,000 units in China, which ranked third after 1.78 million units in North America and 840,000 units in Japan. Honda is pushing ahead with its plan to expand production in China. In the near future, Honda's production in China will definitely overtake its production in Japan to become the second largest, after North America.

▽To have production capacity of over 1.5 million units by 2020

 Aiming to achieve sales of more than 2 million units in China in 2023, Honda will expand its existing plants in Guangzhou and Wuhan. Honda also plans to construct a new plant, which will be the third plant for Dongfeng Honda Automobile Co., Ltd. Honda is going ahead with its plan to boost its annual production capacity in China from 890,000 units as of September 2014 to at least 1.25 million units in and after 2015 and further to above 1.5 million units by 2020.

 In line with these actions, the automaker reportedly plans to expand its engine production capacity in China to annually produce 1.06 million units in and after 2015 and at least 1.48 million units in 2020. Furthermore, at the end of August 2014, Honda started construction of a new plant for producing engine parts and chassis components for 1.5 million to 2.0 million complete vehicles in Huizhou City, Guangdong Province to expand its production and sales in China.

 

 



To attain annual production volume of over 2 million units by 2023

Sales Changes by Honda JV in China Honda has set its medium- and long-term sales targets to a total of 1.3 million units in 2015 and over 2 million units in 2023 in China. According to its joint venture (JV) sales targets, it has set sales of 1 million units in 2020 for Guangqi Honda Automobile and 1 million units in 2023 for Dongfeng Honda Automobile.

 

 In line with these targets, Honda proceeds with its plan for plant expansion. As of September 2014, the existing plants of Guangqi Honda and Dongfeng Honda are under expansion work. In addition, Honda has announced a plan for constructing a new plant, which will be the third plant for Dongfeng Honda.


Passenger car production capacities in China by Honda JV and plant

(1,000 units)
Company
(by region)
Plant Production
model
Production volume Annual production capacity
2012 2013 Jan.-
Aug.
2013
Jan.-
Aug.
2014
As of  the end of Sep. 2014 After expansion
(planned year)
Dongfeng Honda
(Central China region)
Wuhan
1st plant
Elysion,Jade, CR-V,Civic, Spirior,Ciimo sedan 285 326 191 225 240 240
Wuhan
2nd plant
120                     240 (by 2015)

* Note:Expansion work began in Feb. 2014.
The 3rd
plant
(Construction planning is under way. Details, including location and annual production capacity, have not been disclosed. Construction will begin by 2016.) 0 (by 2017)
⇒ n.a. (after 2018)
Total 285 326 191 225 360 480 (by 2015)
⇒ Over 1,000 (by 2023)
Guangqi Honda
(South China region)
Huangpu plant
(Guangzhou 1st line)
Accord, Fit, City,
City Fengfan,
Crider,
Crosstour,
Odyssey,
Everus S1
309 439 256 325 240 240
Zengcheng plant
(Guangzhou 2nd line)
240 240
Zengcheng plant
(Guangzhou 3rd line)
Under construction. (Construction of new production line with engine plant to be built next to it began in May 2013; it will be operational in 2015.) - 120 (in 2015)
⇒ 240 (in medium and long-term)
Total 309 439 256 325 480 600 (in 2015)
   ⇒720 (medium and long-term)
     ⇒over 1,000 (by 2020)
Honda Automobile (China) Co., Ltd.
(South China region)
Guangzhou special factory for export Accord European version (Production of the Jazz/Fit European version was transferred to Mexico.) 29 24 16 5 50                      50

*Note:As of the end of Sep. 2014, no expansion plan
Total 29 24 16 5 50 50
Grand total 623 789 463 555 890 Over 1,250(in and after 2015)
⇒ over 1,500(by 2020)
⇒ over 2,000(by 2023)

Note: Figures of actual production volume are rounded off to whole numbers.

 

Boosting production capacity for passenger cars

▽Guangqi Honda: Starts construction of passenger car plant and engine plant
 In May 2013, Guangqi Honda began construction of a new production line for passenger cars, which is the third production line for Guangqi Honda, within the Zeng Cheng plant premises in the suburbs of Guangzhou City. An engine plant will be built next to the new production line within the plant premises. The third production line is slated for launch in 2015, with an annual production capacity of 120,000 units. In the future, the annual production capacity will be increased to 240,000 units.
 After the installation of the third production line, Guangqi Honda will increase its annual production capacity for passenger cars from 480,000 units as of September 2014 to 600,000 units in 2015 and to 720,000 units in the medium- to long-term.
 The total investment, including the investment on the engine plant, amounts to CNY 3.56 billion (JPY 59.3 billion). The site area of the third production line will be less than half of that of Guangzhou's second line (current Zeng Cheng plant). The line is fitted with energy-saving facilities, including a solar power-generating system. It also features a painting process that is shortened through the adoption of a highly functional painting technology and a stamping process that is equipped with a highly efficient laser-welding machine.
 Although no official announcement has been made by Honda, it has been reported that Guangqi Honda will increase the annual production capacity of the engine plant that is being built next to the production line from 100,000 units at the beginning of operation in 2015 to 200,000 units in the future.
▽Dongfeng Honda: To construct third passenger car plant by 2016, in addition to expansion of second passenger car plant
 In February 2014, Dongfeng Honda began the second-phase expansion work of the second passenger car plant in Wuhan, Hubei Province. The second-phase expansion work will increase the annual production capacity of the second plant by 120,000 units, the same volume brought by the first-phase work. The second-phase expansion work is scheduled for completion in 2015. With the annual production capacity of the first Wuhan plant (240,000 units in total) combined, the gross annual production capacity of Dongfeng Honda will expand from 360,000 units at present to 480,000 units at the completion of the second-phase expansion work. The second Wuhan passenger car plant includes stamping, welding, painting and assembly lines, plastic molding and engine assembly lines and a test course.
 Furthermore, in July 2013, Dongfeng Honda announced a plan to begin construction of a new plant (third passenger car plant) by 2016. However, details including the location and annual production capacity have not been disclosed.

 

Dongfeng Honda's mid-term business plan announced in July 2013

 In July 2013, Dongfeng Honda announced its mid-term business plan with the key phrase "Challenge 1+."
 * To become No. 1 in each area of the business operations by quickly shifting gears from the new starting line.
 * The sales target for 2015 is set to 500,000 units. The company's mid-term sale target is to achieve sales of 1 million units within ten years (by 2023). In line with these targets, the company will increase the number of Honda car users in China to over 10 million in total by 2023.
 * To accelerate the introduction of new models that adopts Honda's FUNTEC technology for advanced environmental friendliness, safety and comfort.
   (1) To introduce Honda's power system technology "Earth Dreams Technology" into the current commercial vehicles in succession.
   (2) To strengthen the company's commercial vehicle lineup, mainly with compact cars, and introduce a total of six new models, including fully redesigned models, by 2015.
 * To construct the second Wuhan passenger car plant with an annual production capacity of 240,000 units (120,000 units through the first-phase work) in two phases (the second-phase work began in February 2014) to bolster the company's annual production capacity to 480,000 units (including 120,000 units at the first plant). Honda will start the construction of a new third passenger car plant by 2016.
 * To increase the number of dealerships to 450 (there are more than 360 dealerships as of September 2014).

 

 



To expand annual engine production capacity to 1.06 million units in and after 2015

 Along with the expansion of the production capacity for complete vehicles, Honda is expanding its annual production capacity for engines in China from about 940,000 units at present to 1.06 million units in and after 2015 and to over 1.48 million units in 2020.

 

▽Dongfeng Honda: Engine plant that is to be built next to second passenger car plant is under construction
 As of September 2014, Dongfeng Honda has already started the production of engines on an engine assembly line at the second Wuhan plant (after the completion of the first-phase work) as well as on an engine assembly line at the first passenger car plant. Details, such as production capacity, have not been disclosed.

 

▽Guangqi Honda: Its own new engine plant that is to be built next to third Guangzhou passenger car line is under construction
 In May 2013, Guangqi Honda, which did not have its own engine plant, began construction of a new engine plant together with the third production line (plant) at its Zeng Cheng plant. Details, such as production capacity, have not been disclosed.
 Honda has disclosed its plan to expand its engine production capacity in China to at least 1.48 million units in 2020. If sales expand more than expected, further expansion of the company's engine production capacity will be required.

 

Honda's engine production capacity by plant in China

(1,000 units)
Engine
plant
Region Head-quarter Production volume Annual production capacity
2011 2012 2013 Jan.-
Aug.
2013
Jan.-
Aug.
2014
As of the
end of
Sep. 2014
After expansion
(planned year)
Dongfeng
Honda
Automobile
Center
China
region
Wuhan 253.9 285.4 325.8 191.4 225.3 Over 360 Over 480 (in 2015)
Dongfeng
Honda
Engine
South
China
region
Guangzhou
(in the city)
366 306.7 437.8 257.4 325.6 Over 480 Over 480
Guangqi
Honda
Automobile
Guangzhou
(Zengcheng)
(Construction started in May 2013.) - 100 (in 2015)
⇒ Over 200 (by 2017)
Total
(contain none of the Honda
Automobile (China) Co., Ltd.)
619.9 592.1 763.6 448.8 550.9 940 Over 1,060
(in and after 2015)
  ⇒ Over 1,160 (by 2017)
⇒ Over 1,480 (in 2020)

Note: Plans, if any, for further production-capacity expansion of each of the three plants above have not been disclosed.

 

Expanding parts business: To build new large plants for engine parts in Huizhou City and transmissions in Foshan City

▽Dongfeng Honda Auto Parts: Begins construction of new plant, which will annually produce engine parts and key chassis components for 2 million complete vehicles
 At the end of August 2014, Dongfeng Honda Auto Parts Co., Ltd. began construction of a new plant in Daya Bay Economic & Technological Development Zone (area for emerging industries) in Huizhou City, Guangdong Province. The new plant will produce engine parts and key chassis components for locally built passenger cars. The new plant will cover 420,000 square meters of floor space. The total investment will amount to CNY 4.5 billion. The new plant will annually produce parts and components for 1.5 million to 2.0 million complete vehicles, and the company aims to achieve a gross value of production of CNY 3.7 billion.
 The construction of the new plant will be carried out in two phases. Three production lines for casting will be operational in May 2016. New production lines for centrifugal casting and forging will begin operations in March 2017 and June 2017, respectively. The company will complete the relocation of production lines for centrifugal casting from the Xinliao plant to the new plant in 2018.
 Of the production lines at the Xinliao plant, the camshaft production line adopts the "hollow casting technology." The camshaft line is the only line that adopts the technology in China at the moment . The production line for cylinder liners that uses centrifugal casting incorporates a world-class advanced technology, which is possessed by only four companies in the world. The main facility of the production line adopts Honda's expertise and technology in which patents have been filed. This is the first production line that combines casting with machining in China.

▽Honda Auto Parts Manufacturing: To expand production capacity for transmissions and engine parts through second-phase work on its plant
 In December 2013, Honda Auto Parts Manufacturing Co., Ltd. (located in Nanhai, Foshan, Guangdong Province), which produces transmissions and engine parts, received an environmental impact assessment by the jurisdictional government and obtained permission for the second-phase expansion work on its plant. The second-phase expansion work gives the plant an annual production capacity of 600,000 M-CVTs.
 After the completion of the second-phase work, the annual production capacity for transmissions will expand from 490,000 units at present to 1.09 million units. Honda Auto Parts Manufacturing has not disclosed information, such as when the work will start and end.
 Through the second-phase work, a new plant, which employs 1,350 people, will be built. The new plant will have a site area of 49,000 square meters. The total investment amounts to CNY 970 million. It will recruit about 1,350 employees.

 

 



Reference 1: Honda's Vehicle Production Volume

(units)

Region/County 2008 2009 2010 2011 2012 2013 Jan.-Jul.
2013
Jan.-Jul.
2014
Grand total (Honda) 3,957,381 3,012,637 3,643,057 2,909,016 4,110,857 4,298,390 2,409,852 2,650,877
Japan 1,264,387 840,924 992,502 710,621 1,029,313 840,650 417,083 608,901
Oversea 2,692,994 2,171,713 2,650,555 2,198,395 3,081,544 3,457,740 1,992,769 2,041,976
North America 1,421,427 1,030,958 1,287,775 1,103,127 1,691,088 1,781,213 1,041,563 1,031,322
U.S.A. 987,169 723,375 954,502 823,650 1,219,326 1,309,917 760,147 738,947
Europe 230,423 75,583 139,264 97,459 165,606 140,094 83,251 79,417
Asia 858,537 911,728 1,069,046 902,115 1,058,614 1,374,181 774,176 849,902
China 517,571 601,920 676,515 646,208 617,399 788,161 405,192 510,830
The others 182,607 153,444 154,470 95,694 166,236 162,252 93,779 81,335
Data from Honda's press release.
Note: Actual production is on a calendar-year basis. North America includes Mexico. Production in Japan figures are as reported to the Japan Automobile Manufacturers Association (JAMA); overseas production figures are preliminary and on a line-off basis.
▽Year-over-year changes in the actual production shown above
2008 2009 2010 2011 2012 2013 Jan.-Jul.
2013
Jan.-Jul.
2014
Grand total(Honda) 101.2% 76.1% 120.9% 79.8% 141.3% 104.5% 96.1% 110.0%
Japan 94.9% 66.5% 118.0% 71.6% 144.8% 81.7% 61.7% 146.1%
Overseas 104.4% 80.6% 122.0% 82.9% 140.2% 112.2% 108.8% 102.5%
North America 99.2% 72.5% 124.9% 85.7% 153.3% 105.3% 104.0% 99.0%
U.S.A. 97.2% 73.3% 132.0% 86.3% 148.0% 107.4% 105.3% 97.2%
Europe 96.9% 32.8% 184.3% 70.0% 169.9% 84.6% 83.4% 95.4%
Asia 110.3% 106.2% 117.3% 84.4% 117.3% 129.6% 121.4% 109.8%
China 111.7% 116.3% 112.4% 95.5% 95.5% 127.7% 96.5% 126.1%
The others 139.6% 84.0% 100.7% 61.9% 173.7% 97.6% 101.1% 86.7%
▽Chinese production ratio of Honda cars over global overseas and Asia
2008 2009 2010 2011 2012 2013 Jan.-Jul.
2013
Jan.-Jul.
2014
Over Honda's global production 13.1% 20.0% 18.6% 22.2% 15.0% 18.3% 16.8% 19.3%
Over Honda's overseas production 19.2% 27.7% 25.5% 29.4% 20.0% 22.8% 20.3% 25.0%
Over Honda's  Asian production 60.3% 66.0% 63.3% 71.6% 58.3% 57.4% 52.3% 60.1%

 

 



Reference 2: Passenger car sales by Honda's Chinese JVs (by JV, brand, vehicle type and model)

(units)

▽Guangqi Honda Automobile, Honda's Guangzhou and Zengcheng plants in Guangdong Province

Brand Type Model 2009 2010 2011 2012 2013 Jan.-Jul.
2013
Jan.-Jul.
2014
Honda Sedan,
Hatch-back
Accord 187,361 171,728 160,735 104,114 119,542 58,659 40,719
Fit 48,640 33,575 21,043 35,920 40,749 24,518 26,873
City 36 3 - - - - -
City Fengfan 113,191 132,645 123,502 96,913 95,312 59,965 29,070
Crider - - - - 91,623 13,464 89,012
Crosstour - 2,264 1,914 33,982 47,064 26,585 12,824
MPV Odyssey 28,395 45,816 30,404 20,900 27,277 14,401 6,753
Everus Sedan Everus S1 - - 24,696 24,576 13,913 11,575 3,513
Total 377,623 386,031 362,294 316,405 435,480 209,167 208,764

▽Honda Automobile (China),Honda's Guangzhou plant for export

Brand Type Model 2009 2010 2011 2012 2013 Jan.-Jul.
2013
Jan.-Jul.
2014
Honda Hatch-back Fit (North American version), Jazz
1.2/1.4/1.5L
28,299 25,009 24,249 29,034 24,097 13,977 5,475
Sedan Accord (export version) 2.5/3.5L - - - - - - 3,690
Total 28,299 25,009 24,249 29,034 24,097 13,977 9,165

▽Dongfeng Honda Automobile,Honda's Wuhan plant in Hubei Province

Brand Type Model 2009 2010 2011 2012 2013 Jan.-Jul.
2013
Jan.-Jul.
2014
Honda MPV Elyson - - - 6,866 12,510 6,567 5,261
Jade - - - - 27,436 - 34,085
SUV CR-V 105,233 140,000 160,003 169,036 189,972 99,122 101,018
Sedan Civic 93,368 101,198 78,089 79,763 68,942 37,545 31,783
Spirior - 19,402 17,376 12,417 7,462 4,559 2,645
Ciimo Ciimo sedan - - - 14,089 15,087 10,728 9,402
Total (Wuhan plant)
198,601 260,600 255,468 282,171 321,409 158,521 184,194
Grand total
(Honda's Chinese-made vehicles)
604,523 671,640 642,011 627,610 780,986 381,665 402,123

Note: All the sales figures are on a factory-shipment basis and include exports. Honda Automobile (China) terminated production of the Jazz (North American-spec Fit) in April 2014. Instead, the company started the production and export of the Accord in the first half of 2014 (production in May and export in June).

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