HUIZHOU, China - With demand for cars in China exploding, Honda Motor Co.'s components factory here can't make parts fast enough.
"Our job now is to catch up with the surging production of Honda vehicles in China," Takao Akimoto, president of Dongfeng Honda Auto Parts Co. Ltd., said in a small meeting room as dozens of workers toiled nearby amid the din of machine tools.
China's auto market is the fastest-growing in world, with annual sales of passenger cars growing 56 percent last year to top the one million mark for the first time.
Despite rising competition, global auto giants are pouring billions of dollars into the country to tap growing Chinese wealth.
The car parts venture, 56 percent owned by Honda Motor, plans to boost output by 70 percent this year to 1.2 million units to mainly supply Honda's rapidly expanding car venture in the nearby southern Chinese city of Guangzhou, Akimoto said.
"The Chinese car market is developing so fast that it really startles me," Akimoto told a small group of reporters, wearing a white uniform in the same style as the plant's laborers.
About 70 percent of Dongfeng Honda's products, including crankshafts, connecting rods and brake discs, go to the Guangzhou car venture, which aims for 90 percent growth this year to 110,000 vehicles, including cars and minivans.
Honda Motor, which started making Accord sedans in Guangzhou in 1998, has said the venture plans to boost its annual capacity to 240,000 vehicles by next year. Honda owns 50 percent in the joint venture with Hong Kong-listed Denway Motors.
Akimoto said output from Dongfeng Honda also will support Honda's planned second car-making venture in Guangzhou, which next year is set to start making 50,000 small cars a year exclusively for export to Asia and Europe.
"We will increase investment (in the auto parts plant). We must expand production," said Akimoto, who did not give a figure.
Honda Motor last July announced plans to expand parts production in Asia to raise the local content ratio of Honda vehicles made in Asia outside of Japan, as well as to supply Honda vehicle plants in other regions, including Europe.
Dongfeng Honda recently began to export engine parts to Honda's plant in the United Kingdom, Akimoto said.
To meet demand, the plant has doubled its workforce in the past year to 861.
Honda Motor set up the parts venture with state-owned Dongfeng Motor and two other Chinese partners in 1995 with capital of US$25 million. Sales reached 200 million yuan (US$24 million) last year.
Said Akimoto: "We are not very profitable right now, but we have been re-investing all of our profits for expansion."