Honda Oz looks to Indonesia, Malaysia

HONDA Australia is looking to Indonesia and Malaysia as a source of future models to broaden its range and mitigate against a repeat of disasters such as the Thai floods that cripple vehicle supply.

Free-trade agreements now under negotiation with both countries could also make the move more attractive, adding to the duty-free supply of Honda cars from Thailand that has been the source of 80 per cent of Honda’s sales volume in Australia.

India might also ultimately join the ranks of suppliers of Honda vehicles for Australia as the Japanese company ramps up production capacity around the region.

The study underway at Honda Australia was revealed by managing director Satoshi Matsuzawa in Bangkok, where he attended the reopening ceremony for the Honda Automobile Thailand car factory that was put out of action for six months by last year’s floods, slicing car supplies to Australia.

Mr Matsuzawa said that, while no firm decisions had been made on supply from other South-East Asian factories, it was being studied.

He said Honda Australia not only had to be sure the product made at these plants was right for Australia but also that there would be sufficient capacity to meet export targets while also satisfying these countries’ growing domestic demand.

Left: Honda Brio hatchback Honda Australia MD Satoshi Matsuzawa.

Until now, Thailand has served as Honda’s export hub for South-East Asia, turning out 240,000 units a year – by far the biggest volume of any Honda plant in the region.

But Honda has announced plans to expand production in Indonesia – and possibly Malaysia – with a view to exporting cars, partly to take pressure off the Thai operation and also to reduce the risk to the supply chain of natural disasters.

In Indonesia, a new plant is being built outside Jakarta to triple Honda volume from 60,000 to 180,000 units at the joint-venture operation, PT Honda Prospect Motor, which is 51 per cent owned by Honda.

Asian Honda president Hiroshi Kobayashi has confirmed that the Indonesian factory will also serve as an export base for both parts and components.

Indonesian reports say the new plant – to come on stream in 2014 – will build Honda’s sub-Jazz light hatchback, the Brio, which is already in production in both Thailand and India.

But Mr Kobayashi said the new Indonesian plant would produce a minivan version of the Brio that he described as a “unique product” in the Honda range.

Honda Australia’s Mr Matsuzawa confirmed the minivan was under study for Australia.

“There is no such market in Australia now, but we have to know in future,” he said. “It is under study now.

“If there is a trend going on towards smaller cars and those type of seven-seater, six-seater cars, then we have to know.

“So, in that sense, we are taking seriously that opportunity to look at the Brio MPV, if it is suitable to the Australian market.”

If the Brio-based minivan does come to Australia, it might be sold alongside the Brio five-door hatchback, which is also on Honda Australia’s list of potential products.

Nissan Australia has set a precedent here, importing Indonesian-built Micras since last year.

Mr Matsuzawa said a Brio for Australia would most likely be the next-generation model – due in about four years – but the current generation that was launched in Thailand last year might be considered if it could be determined that the demand was there and that suitable specifications for Australia could be delivered.

Honda’s Malaysian plant – 100 per cent owned by the Japanese company – currently builds Civic, Accord, CR-V and City from CKD (completely knocked down) packs from Thailand.

But the plant at Melaka – producing 180 units a day compared with the Thai plant’s 1000 vehicles daily – is likely to play a larger role in future now that the market is opening up and moving away from its previous protectionist practices.

Mr Kobayashi said that, regardless of the Thai floods, Honda had plans to expand production in the region, where the plants would complement each other.

Asked if Australia would get cars from Indonesia or Malaysia, Mr Kobayashi said: “We haven’t decided, but in future that is possible.”

Mr Kobayashi said that until now most exports from plants in ASEAN countries involved parts sent to other factories in the region.

“Now, Indonesia and Malaysia are booming, but also they want to export, so maybe component exchanging is not sufficient,” he said. “Maybe CBU – complete cars – might be needed.

“I think in five years that situation is completely changed.”