Honda To Take Majority Stake In New China JV

BEIJING -Dow Jones reported that Honda Motor Co. has applied to take a majority stake in its planned carmaking joint venture in Guangzhou, China, a Chinese government official said Thursday.

If approved, it would be the first time a foreign carmaker is allowed majority control of a China manufacturing joint venture. Chinese regulations now limit foreign companies to no more than a 50% stake in automobile manufacturing joint ventures.

Honda announced the planned joint venture in July, when it said the new factory would become a major base for exports to markets in Asia and Europe. Its partners in the venture, which will export all of its output, are Chinese state- backed automakers Guangzhou Auto Group Corp. and Dongfeng Motor Corp.

At the time, Honda didn't announce what size stake it would hold in the joint venture, and the company still says that it hasn't reached a final decision on the issue.

But an official at the Guangzhou Economic and Technological Development Zone,

The development zone official said the plan was still awaiting government approval. However, the Beijing Morning Post, citing unnamed sources, reported Thursday that it had already been approved.

China has in the past allowed given greater leeway to foreign-invested companies who export rather than attempt to sell into the domestic market. It is possible that Honda's plan to export 100% of the plant's output could lead the government to grant the concession of majority ownership.

A spokesman in Honda's Beijing office declined immediate comment, and officials at the foreign investment departments of the State Economic and Trade Commission and the Ministry of Foreign Trade and Economic Cooperation said they weren't familiar with the Honda project.

The new Guangzhou venture will start making cars by the end of 2004 at an initial pace of 50,000 vehicles a year.

Honda's existing manufacturing facility in China, a 50-50 manufacturing joint venture called Guangzhou Honda Automobile, has served the domestic market since 1998.

Guangzhou Honda expanded annual production to 51,000 vehicles in 2001 from 32, 000 in 2000. Honda now makes the Accord sedan and Odyssey minivan in China, and plans to soon add a compact car that is similar to the popular Fit model sold in Japan. Honda plans to expand production capacity at its existing Chinese plant to 120,000 vehicles annually by March 2003.