[Global Network Report reporter Wang Huan] According to “Nihon Keizai Shimbun” report, Honda will increase the production of high-end car brand “Acura” in China. The new SUV “RDX” imported from the United States was changed to be produced in China and listed in 2018. Due to the intensified trade war initiated by the United States, cars imported from the United States are subject to a 40% tariff. To reduce the impact of high tariffs, Honda is expected to expand its production models.
Honda has a joint venture with Guangzhou Automobile Group and Dongfeng Motor Group in China to produce cars through two joint ventures. In FY2017 (as of March 2018), Honda’s new car sales in China were 1.45 million units, second only to the largest US market (1.64 million units), accounting for about 30% of Honda’s overall sales.
Acura’s new medium-sized SUV “RDX” has been produced in the factory of Guangqi Honda, one of the joint ventures. The car used to be imported from the United States. Before the official tariffs and trade wars between China and the United States were officially launched in July 2018, Honda was discussing the transfer of production from the United States to China. In addition to capturing local demand in China, the aim is to increase cost competitiveness.
As a market opening measure, China has lowered its import tariffs from 25% to 15% since July, but the tariffs on cars imported from the United States have increased to 40%. As some parts of the new RDX continue to use US products, this part of the parts is subject to high tariffs, but the vehicle is no longer subject to high tariffs. The original model of RDX has a minimum price of 399,800 yuan, and the new model will be about 20% cheaper.
Due to the impact of the trade war, BMW and Daimler raised the price of cars sold from the United States to China. The new RDX is relatively cheap in high-end cars by local production in China, which will become a selling point.
Honda began importing and selling Acura in China in 2006. In 2016, we started local production in Guangqi Honda. The new RDX will be the third localized production model.
Honda has been promoting local production in large Japanese car companies. In 2017, the proportion of localized production in the United States accounted for 74%, and in China it reached 99%.
Even so, Honda still needs to increase production in China with the aim of improving its ability to adapt to tariffs. Before raising tariffs on imported American cars due to trade wars, China imposed a 25% high tariff on imported cars. For this reason, Yangge sold only 16,400 vehicles in China in 2017, accounting for 1% of total sales.
Chinese consumers are increasingly eager for high-end cars, and the new RDX will strengthen its promotional activities with localized production in China. The goal is to achieve an annual output of more than 10,000 vehicles, more than 10 times the previous model.
China’s new car market has slowed significantly. Sales in October decreased by 11.7% year-on-year (about 2.38 million units). Cumulative sales from January to October also turned down year on year. It is expected that the whole year of 2018 will again show negative growth after 28 years. Honda’s Chinese minister, Mizuno Satoshi, said that due to the deterioration of the economic situation and the decline in consumer psychology caused by the trade war, “it has entered the adjustment phase”.
Post time: Nov-14-2018