Japan's no.3 automaker, known for building fuel-efficient vehicles and power products, is enjoying runaway demand for the remodeled Civic sedan and CR-V crossover, keeping supply chronically short of orders, particularly in North America.
To alleviate the bottleneck, Honda will begin production of the CR-V at its plant in Mexico from the fall of 2007, Chief Executive Officer Takeo Fukui told a year-end news conference, adding the auto maker would also double annual capacity at its Brazilian car plant to 100,000 units by mid-2007.
The Tokyo-based car maker has already announced a slew of new factories and expansions over the past year, including plans for a car plant in Indiana to start operations in late 2008.
In the United States, its single-biggest market, Honda aims to increase sales by 3 percent to 1.56 million units in 2007, extending its record run to 11 straight years. Part of that will be fuelled by an all-new Accord, which Honda said would hit North American showrooms next fall.
"Most customers around the world want value-for-money products, and in that sense we expect to sharpen our competitive edge and boost sales," Fukui said, playing down increasing competition from lower-cost South Korean and other brands.
Honda, the world's top motorcycle maker, also estimated its motorcycle sales to rise 3 percent to a record 12.7 million units this year, and power products to surge 15 percent to 6.4 million units.
Honda did not provide a global sales forecast for 2007, but said it expected its European car sales to jump 13 percent to 350,000 units, and sales in the Asia-Pacific region excluding Japan and China to also rise 13 percent, to 360,000 units.
In China, which most global car makers consider a strategically crucial market, Honda estimated its sales grew 23 percent this year to 320,000 units, short of the 350,000-unit target due to a delay in the sales network expansion at its smaller local joint venture, Dongfeng Honda.
For 2007, Executive Vice President Satoshi Aoki said Honda would aim for sales of around 400,000 units in China, outpacing his forecast for overall market growth of 10-15 percent.
To become more competitive, Honda said its main China joint venture, Ghuangzhou Honda, is looking at establishing a local automobile research and development center.
JAPAN MARKET TOUGH
Japanese auto makers are counting on sales expansion overseas to make up for tepid demand at home, where low-tax 660cc minivehicles are stealing all the growth.
Despite integrating its three sales channels into a single network this March, Honda estimated its domestic sales would fall 2 percent to 700,000 units this year, betraying the company's expectations for a rise.
Honda said it would aim to reverse that trend by launching a new seven-seater vehicle next spring, while developing more competitive minivehicles through its beefed-up collaboration with auto parts and minivehicle maker Yachiyo Industry Co. Honda on Tuesday completed its purchase of more Yachiyo shares, boosting its stake to over half from 34.5 percent.
Fukui said Honda would also consider introducing in Japan a clean-diesel engine currently under development, after promising the powertrain for the U.S. market within three years.
Honda also said it would invest 25 billion yen ($212 million) to build a new engine plant in Saitama, north of Tokyo, with an annual production capacity of 200,000 units. The factory will employ about 500 people and supply Honda's car factories both inside and outside Japan.
Further out, Honda has said it wants to boost sales to 4.5 million cars and 18 million motorcycles in 2010 globally.
Shares in Honda have gained 27 percent in the year to date, outperforming the transport sector's 17 percent rise.
Banc of America this month named Honda its top pick in the autos sector for 2007, ahead of Toyota Motor Corp., citing its upcoming new product pipeline, volume leverage and defensive nature.