Honda Motor Co. this week decided against expanding its manufacturing capacity in Guangzhou, where it runs a joint venture with a local Chinese partner, a person close to the car maker said.
The decision follows a comment from Zhang Fangyou, chairman of Guangzhou Automobile Industry Group Co., at an industry conference earlier this month. Mr. Zhang said the joint venture was considering expanding its production capacity after its plants in southern China nearly reached their full capacity of 360,000 vehicles a year this year.
But Honda's top executives in China, who gathered in Guangzhou earlier this week to finalize the company's business plan for next year, "decided against expanding capacity so quickly… and decided to take a more cautious approach," said the person.
Honda's manufacturing and sales joint venture with Guangzhou Auto includes two plants in the southern Chinese city of Guangzhou. One is capable of producing 240,000 vehicles a year with two eight-hour shifts of work, while the other could assemble 120,000 vehicles a year. Capacity for both plants is almost fully used now, but additional capacity could still be squeezed out through overtime, among other means, the person said.
While Honda may decide to go ahead with expanding capacity at the smaller plant after this year, "the company doesn't plan to do so this year, and it is not in next year's business plan," the person said.
The person said with further investment, annual capacity of the smaller plant can be expanded to 240,000 vehicles, raising the joint venture's overall capacity in Guangzhou to 480,000 vehicles a year.
Honda has a second manufacturing and sales joint venture in China with Dongfeng Motor Co.
Like rival Toyota Motor Corp., Honda got a slow start in China compared with many other foreign auto makers but has seen sales jump this year. For the first nine month of the year its sales volume is up 15% from a year earlier, and it posted a 27% increase in September, according to J.D. Power & Associates. China's overall passenger car market in the meantime grew 76% in September, 35% through September.
