Honda stamps presence in ASEAN ahead of AFTA

Honda stamps presence in ASEAN ahead of AFTA

Eileen Ng, Agence France-Presse, Kuala Lumpur

Japan's number two automaker Honda Motor Co. is racing to
stamp its presence in Southeast Asia with two new manufacturing
bases in Indonesia and Malaysia ahead of market opening under the
ASEAN Free Trade Area (AFTA).

Tired of playing second fiddle to rival Toyota, Honda's
expansion is part of a strategy to lower costs, boost efficiency
and enlarge its share of the Association of Southeast Asian
Nations' (ASEAN) growing market.

Honda this week said its RM180 million (US$47 million) factory
in southern Malaysia's Malacca state would begin production next
month and pledged to commit a total RM374 million in its
operations here by 2005.

The plant, which has a production capacity of 20,000 units a
year, also houses Honda's first facility in Asia to produce
critical drive-shaft components and will be opened by Prime
Minister Mahathir Mohamad on Jan. 17.

Honda, in a statement to AFP, said it has also invested $30
million in a plant in Indonesia which has a capacity of 40,000
units a year and would begin operations March 2003.

The two new plants augment Honda's existing facilities in
Thailand and the Philippines and seal its presence in ASEAN's top
four auto markets.

The company said it planned to raise production in its
Thailand plant to 100,000 units early next year from some 55,000
cars now, to cater for ASEAN demand and export to Japan and
Africa.

"We produce 150,000 cars in ASEAN now but we aim to increase
this to 500,000 by 2005," Honda Malaysia managing director and
chief executive Seiji Kuraishi told AFP in an interview.

About 80 percent of the targeted 500,000 units will cater for
ASEAN demand, with the rest to be exported, he said.

Kuraishi said each Honda plant would be made to focus on the
production of certain models to gain economies-of-scale and boost
competitiveness to challenge Toyota.

"This is our future strategy. ASEAN is an important market for
us and we are gearing to be more cost competitive under AFTA. We
hope to achieve 15 percent share, from below 10 percent now," he
said.

ASEAN sales are currently not significant to the Japanese
automaker, contributing less than three percent of its global
sales.

But Honda, in the statement, said it foresee sales in ASEAN to
surge by nearly 30 percent to 90,000 units this year and to more
than 100,000 in 2003.

The region is a long way behind Honda's top market, the United
States, where sales is seen to hit 900,000 units this year and
Japan with a target of 800,000.

Honda said its best selling models in ASEAN were the CRV four-
wheel-drive and the low-end City. It predicted growing demand for
multi purpose vehicles (MPV) and sports utility vehicles (SUV).

"If we consider the trend in Japan, U.S. and Europe, we can
expect more shift to MPV or SUV type from sedan type," it added.

Current tariffs range from 10-40 percent for cars and
components in ASEAN's four biggest markets -- Indonesia,
Malaysia, the Philippines and Thailand.

But under AFTA, most members must cut tariffs to a maximum of
five percent by next year except Malaysia, which has been allowed
to delay opening its auto industry until 2005.

ASEAN groups Brunei, Cambodia, Indonesia, Laos, Malaysia,
Myanmar, the Philippines, Singapore, Thailand and Vietnam.