Honda has reached an agreement with its Chinese partners, Guangzhou Auto Group Corporation and Donfeng Motor Corporation, to set up a second plant to make cars in China solely for export. The cars will be shipped to Europe and markets in Asia.

Honda plans to make a small car at the low cost plant, with production planned to start by the end of 2004. An initial target production level of 50,000 units per annum has been set.

Honda and its two Chinese partners currently make Honda’s Accord and Odyssey cars jointly in China with a schedule to build up annual output capacity to 120,000 units by early 2003. The Accord and Odyssey models made in China are sold locally.

The second plant deal is being seen as an important part of Honda’s global manufacturing strategy, which calls for a higher level of vehicle and components production in lower cost Asian operations.

Honda has also said that it plans to increase transmission production in the Philippines and set up a new production plant in Indonesia for transmissions. About a third of the transmissions produced in the two countries will be installed in Honda cars made in Europe.

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Connecting rods and other parts will be produced at a Honda joint venture plant in China for export to European plants later this year.