The move will spread the bulk of components and be a means of cutting costs.

The plan was revealed on Saturday by Kadowaki Koji, president of Guangzhou Honda, the Japanese carmaker's existing joint venture with Guangzhou Automobile Group in South China's Guangdong Province.

"Our two ventures in China will use 60-80 per cent of the same components, including engines, to make small cars and to cut costs," Koji told China Daily.

He said Guangzhou Honda will begin to produce a small-sized passenger model next year to cash in on the fast-growing Chinese car market, especially for vehicles under 1.6-litres.

"The model of Guangzhou Honda will be a notchback car, as Chinese consumers seem to prefer this kind of model to a hatchback one," said Koji.

Honda's three-way manufacturing base, with Guangzhou Automobile Group and Dongfeng Motor Corp, will begin small car production in 2004. But, all the vehicles manufactured at the base, also to be located in Guangzhou, will be for export.

The new base will be the first Sino-foreign vehicle joint venture with a foreign company as the major shareholder.

"We want to control a more-than-50-per-cent stake in the new joint venture, as all of its products will be sold outside the Chinese mainland," Koji said.

He said Honda and the two Chinese partners are waiting for the central government's approval of the new joint venture.

But he did not reveal the specific stake which Honda will have in the new joint venture.

Currently, Guangzhou Honda produces the Japanese carmaker's Accord sedans and Odyssey multi-purpose vehicles (MPVs).

According to Koji, sales of Guangzhou Honda increased by 19.8 percent year on year, to 46,019 units during the first nine months of this year.

The joint venture has sold more than 8,600 Odysseys so far this year.

The 2.3-litre model, launched in April, is targeted at local institutional and private buyers, said Koji. Guangzhou Honda aims to sell 14,000 Odysseys this year.

(China Daily October 28, 2002)