Honda's new plant here is preparing to build 30,000 Jazz models for export to Europe starting next year - the first China-built cars to reach western Europe.

According to Automotive News Europe, Honda officials said Honda Automobile (China) - a joint venture of Honda, Dongfeng Motor, and Guangzhou Auto Group - will begin producing the Jazz [Fit] exclusively for export by the end of the year.

Honda, Japan's No. 2 carmaker, received permission from the Chinese government to take a 65% stake in the Chinese venture on the condition that it builds cars for export at the plant, which has a capacity of 50,000 units. Other foreign carmakers in China have 50-50 joint ventures.

Honda plans to export all 50,000 units of the Jazz from the factory starting in 2006 or 2007. Most of the cars will go to Europe; the rest will go to countries in Southeast Asia. Europe also will continue to receive Jazz models from Japan, as Honda sells about 130,000 units a year in western Europe.

The cost of building cars in China is up to 30% higher than in other countries since many components must be imported and there are high import tariffs on parts such as engines and transmissions.

The Chinese government's long-term goal is to export 40% of the vehicles built in the country. Newswires [last week] reported that Volkswagen, China's market leader, will build models for export from a new €200 million assembly plant in Shanghai.

But other sources said VW and other foreign carmakers building cars in China will be too busy meeting booming domestic demand to export cars on a large scale.