Japan's Honda Motor announced yesterday it and Chinese partner Guangzhou Automobile Group will build a new plant to increase the annual production capacity of their joint venture to 360,000 cars.

The new plant will have an annual capacity of 120,000 units and begin operations in the second half of 2006, Honda said in a statement.

Investment in the new plant will total 2.2 billion yuan (US$265.7 million), the company said.

Currently, the 50-50 venture in Guangzhou, capital of South China's Guangdong Province, has an annual capacity of 240,000 units and builds Accord sedans, Odyssey commercial wagons and Fit compact cars.

The new project came after Honda announced on Monday that it and other Chinese partner Dongfeng Motor Corp will quadruple the annual capacity of their partnership in Wuhan, capital of Hubei Province, to 120,000 units in 2006.

Honda's total production capacity in China will almost double to 530,000 units a year in 2006, with help from another export-oriented car joint venture with Dongfeng and Guangzhou Automobile which will begin operations at the end of this year with an annual capacity of 50,000 small-sized cars.

With the new plant, Guangzhou Honda will be able to "respond to strong demand for its current product line up as well as meet the long-term growth in demand of the Chinese automobile market," Honda said.

Guangzhou Honda aims to increase output to 215,000 cars this year, up from 117,000 units last year.

Honda and Guangzhou Automobile formed the partnership in 1998 through a joint buy-out of a car plant previously owned by French car producer Peugeot.

To support Guangzhou Honda's expansion, the Japanese car producer also plans to enlarge production capacity of its engine joint venture in Guangzhou with Dongfeng, Honda said without elaborating.

Source: China Daily