Honda Motor Co., Japan's third largest carmaker, said Monday it planned to spend US$98 million to build a new factory in Guangdong Province to make transmissions and other engine parts.

Honda Auto Parts Manufacturing Co., wholly owned by Honda Motor (China) Investment Co., will start production in 2007 and hire about 500 workers, the Tokyo-based automaker said in a statement.

The plant, which will supply Honda's automobile production joint ventures in China, is scheduled to start production in spring 2007 with an initial production capacity of 240,000 units per year, it added.

Honda has two automobile joint venture companies -- Guangzhou Honda Automobile Co. with Denway Motors, and Dongfeng Honda Automobile Co. with Dongfeng Motor Corp. –- that target the domestic market.

It also has a car making joint venture, Guangdong Honda Automobile (China) Co., for export.

Honda, the first Japanese automaker to build vehicles in China, will supply the components to its two ventures and its third plant which makes cars solely for export. The three companies would be able to build 530,000 units a year in the second half of 2006, on rising auto demand in China, Honda said.

Honda currently produces five models including the Accord sedans and the Fit compact car in China and imports the Stream minivan and Legend luxury sedans from Japan. The company predicts sales will rise 23 percent in China this year to 261,000 units.

The company became the first and only automaker in 2003 to set up a factory in Guangzhou, which makes cars solely for export. The plant produces Fit compact cars to ship to Europe and the rest of Asia.

The maker of Odyssey minivan said it would be the company's fourth overseas factory that can produce automatic transmission in a full-scale local production after ones in Ohio in the United States and Indonesia as well as a Georgia factory that's under construction.

It said local production of components would enable Honda to expand production in China and help lower costs.

(Shenzhen Daily October 18, 2005)