Buoyant Honda keen on hybrid

Honda will soon build its first new factory in Japan in three decades and also plans to have a low-cost hybrid car and clean diesel engine on the market within three years.

The NZ$2 billion expansion plans reflect the company's buoyant mood, three weeks after it announced a 23 per cent rise in net profit for the year to a record of $8.7 billion.

Honda, which is Japan's third largest carmaker, is determined to capitalise on its strengths as a leader in environment-friendly cars and a company with a strong local manufacturing presence in its biggest markets.

The carmaker expects global sales to increase to 4 million by 2007-8, from 3.4 million in 2005-6. It forecast global revenue would reach $140 billion by 2006-7, a year ahead of schedule.

To meet this increased demand, it will build one factory in Japan and another in the United States. The $1 billion Japanese plant, near Tokyo, will produce 200,000 cars a year when it opens in 2010, raising domestic production to 1.5 million. The factory will also make engines. The $630 million US factory, its sixth in North America, will also make 200,000 cars a year when it opens in 2008, boosting American production to 1.6 million.

Honda is developing its low-cost environment-friendly hybrid for the family market to meet its ambition to cut average carbon dioxide emissions by 10 per cent. It aims to sell the hybrid by 2009.

The company also announced accelerated expansion in India, a research and development centre in Japan, a new engine factory near its assembly plant in Ontario, Canada, and a doubling in capacity at its Brazil car plant to 100,000 units by 2008.

The US expansion partly reflects Honda's attempts to fight protectionism. Unit sales rose 7 per cent in the US in the year ended March 31.

By contrast, US carmakers are losing market share. Honda predicts car sales of 2 million or more in North America by 2010. Its North American factories are operating at close to full capacity.