Toyota, Honda may slow exports of China-made cars

Shanghai, June 21 (Gasgoo.com) China's decision to allow greater exchange-rate flexibility may slow the plans of Toyota Motor and Honda Motor to export Chinese-made vehicles as the Chinese currency appreciates while the Japanese carmakers' suppliers in China raised wages to end strikes, Bloomberg reported today.

In a statement on June 19, China's central bank said that it will allow the yuan more flexibility, signaling an end to the currency's two-year-old peg to the dollar. The currency climbed the most in 20 months against the dollar and forwards jumped.

The looser currency stance comes "on the back of all these moves to endorse the wage increases," Jim O'Neill, Goldman Sachs Group Inc.'s chief global economist, said in a Bloomberg Television interview yesterday. "It's all part of moving to the consumer, more domestic-demand-driven economy."

In the past month, labor unrest disrupted production at Toyota and Honda's Chinese plants and forced their local suppliers to increase wages, pushing higher labor costs of the automakers' operations in China, now the world's largest auto market that they are turning to for global sales growth.

In addition to the rising labor costs, the Chinese yuan's appreciation may hamper plans to export Chinese-made vehicles by carmakers including Honda, which operates an export-only factory in Guangzhou, capital of southern China's Guangdong province.

Honda probably has to have second thoughts on its export plant, but Japanese carmakers won't change plans to build vehicles in China for the domestic market, in part because of import duties, an industry researcher in Japan said to Bloomberg today.

The Chinese government aims to boost exports of vehicles and parts to $85 billion by 2015 from at least $19 billion last year and the equivalent of 10% of the global auto trade by 2020.