Honda and Dongfeng To Make SUVs in China

TOKYO, Aug 8, 2003; Reuters reported that Honda Motor Co said on Friday it had formed a 50-50 joint venture with China's Dongfeng Motor Corp to produce Honda's CR-V sport utility vehicles in the central Chinese city of Wuhan.

The new venture, Dongfeng Honda Motor (Wuhan) Co, will begin production in the first half of 2004 after renovating an existing plant at a cost of $44 million. Annual output capacity will be 30,000 units.

The announcement had been expected after an executive at Dongfeng Motor, China's third-largest auto maker, told Reuters last month that a joint-venture pact had been sealed, although Honda had declined to confirm it.

The agreement marks the latest push by foreign car makers into the explosive Chinese market, where car sales are growing at an annual rate of about 60 percent.

Among the foreign firms scrambling to snatch a piece of the Chinese car market, Honda has been one of the most successful and profitable, having entered at a relatively low cost. Its only headache so far had been keeping up with heavy demand for its cars with the limited capacity it has.

Nissan Motor Co, for instance, set up a $2 billion joint venture with Dongfeng in June to make just over 500,000 cars and commercial vehicles a year by 2006.

By next year, Honda's main car-making venture, Guangzhou Honda, will double its production capacity to 240,000 units.

Dongfeng and Honda first joined hands in the production of auto parts, and Dongfeng now builds engines for Honda's hot-selling Accord sedan and Odyssey minivans.

The new joint venture is capitalised at $28 million, and will employ about 600 workers.