Japan's Honda Motor says no plan to build engine factory in China, denies report

TOKYO (Thomson Financial) - Honda Motor Co does not have a plan for now to build a factory in China, Japan's second-largest carmaker said Wednesday, denying a newspaper report that it intends to build an engine plant in Guangzhou at the cost of 30 billion yen.

The report by the Nikkei business daily said the plan is to roll out as many as 200,000 engines a year.

'Guangzhou Honda (nyse: HMC - news - people ) has a permission for engine production, but there is currently no plan (for the joint venture of Honda and a Chinese carmaker) to build an engine plant,' Honda said in a statement.

Guangzhou Honda Automobile Co is Honda's 50-50 joint venture with China's Guangzhou Automobile Group Co.

In the report, the Nikkei said Guangzhou Honda will set up a new engine manufacturing company to produce eco-friendly and fuel-efficient 1.3 and 2.4-liter gasoline engines for models such as the Accord, Odyssey and Fit at the new plant.

The new plant, which will start operations in 2009, will boost Honda's annual output capacity in China by 200,000 units or 40 percent, the report said without citing a source, it said.

Honda currently produces engines for its Chinese-made vehicles mainly at Dongfeng Honda Engine Co, which is its joint venture with Chinese automaker Dongfeng Motor, according to the report.

Volkswagen AG (other-otc: VLKAF.PK - news - people ) is the leading foreign automaker in China, producing almost 700,000 vehicles in 2006, followed by General Motors Corp (nyse: GM - news - people ) and South Korea's Hyundai Motor Co, which rolled out about 400,000 to 450,000 vehicles each in 2006, the report said.