Honda delays plans for $822 million China plant, citing slowdown

(Bloomberg) — Honda Motor Co. will delay the construction of a planned $822 million plant in China as demand slows in the world’s largest auto market.

The carmaker had previously planned to start construction on a third plant with Dongfeng Motor Corp. in Wuhan, China, this year, Chen Binbo, vice president of the joint venture, said in a phone interview Thursday. The carmaker may start building the plant around 2017 and target to begin production no later than July 2018, with a final decision to be made at the end of this year, he said.

Honda is postponing adding more production capacity in China despite boosting sales by 34 percent in the first nine months of this year. Industry deliveries of passenger vehicles had expanded at the slowest pace in three years in the first three quarters, weighed down by moderating economic growth, stock-market volatility and caps on registrations.

“Many carmakers are looking at a staged expansion,” Tao Gao, an analyst at IHS Automotive, an industry researcher, said by telephone. “Honda is not alone. We think it’s likely that many carmakers will shelve the second or third phase expansion plans in the next few years because the market doesn’t grow as fast as they expected.”

Honda’s plans had called for a plant with annual capacity of 240,000 units with an investment of 5.2 billion yuan, building SUVs, sedans and electric vehicles, according to a December 2014 filing by the Hubei provincial development and reform committee approving the project.

The Nikkan Kogyo newspaper reported earlier Thursday that the company had shelved plans to build a plant in China.

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