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Honda, Guangzhou Auto mull capacity expansion
Updated: 2009-11-13 15:21

Honda Motor and Guangzhou Automobile may expand the capacity of their China plant by a third next year to meet robust demand in the world's largest market, chairman of the Chinese automaker said on Thursday.

The No 2 Japanese automaker and its partner operate two plants making Accord, City Odyssey and Fit models in south China, with a combined capacity of 360,000 units.

"Our second plant is smaller with only 120,000 units. We may double the capacity next year," Zhang Fangyou told Reuters on the sidelines of an industry forum in Shanghai.

A spokesman with Honda's China operations said the expansion plan is under consideration but no final decision has been made so far.

China is a major bright spot this year as the government's policy incentives bolstered automobile demand, making the country a safe heaven for global automakers, battered by a sharp-than-expected industry downturn.

Volkswagan AG had in September unveiled a plan to invest 4 billion euros ($5.99 billion) in China till 2011, while Ford Motor, a conservative player, also broke ground for its third China plant recently.

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Car sales in China jumped 75.77 percent to 946,400 units in October, with sales in the first 10 months up 45.18 percent at 8.19 million units, official data showed.

And positive signs that Beijing may continue its efforts to boost domestic consumption, including automobiles, are raising hopes for another bumper year ahead.

A report by China's Ministry of Industry and Information Technology indicated last week that the government might extend some of the existing incentives, including cuts in sales tax for small cars, as well as introduce other steps.

Dong Yang, secretary general of the China Association of Automobile Manufacturers, told reporters on Thursday that he expected China's overall vehicle sales, including trucks and buses, to grow 10 percent in 2010 if the government renews its tax incentives.

Guangzhou Auto, China's sixth-largest, expects its sales to grow 12 to 13 percent this year and to maintain a double-digit growth rate next year, Zhang said.

It is scheduled to start building a joint venture plant with Fiat at the end of this month with completion scheduled for 2011, Zhang added.

The expansionary moves are expected to boost Guangzhou Auto's annual production capacity to more than 1 million units in 2011 from its current 800,000, Zhang added.

Guangzhou Auto also operates a car venture with Toyota Motor in south China.

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