Honda to build 485-million-dollar factory in Japan

Honda Motor Co. will spend 485 million dollars to build a new factory complex in Japan to produce small vehicles as consumers are shifting to less fuel-hungry models, a report said Sunday.

The carmaker will build the complex in the western city of Yokkaichi at a cost of some 50 billion yen (485 million dollars), the Nikkei economic daily said without naming sources.

Honda plans to start operating an engine factory in 2009 and assembly lines around 2010 with an annual output capacity of 240,000 vehicles, it said.

The facilities will be located at a site next to the factory run by small vehicle production subsidiary Yachiyo Industry Co., which will manage the new complex as well, the daily said.

The group aims to cut its production and distribution costs by at least 30 percent at the new complex compared with its current facilities by using state-of-the-art automation lines and advanced distribution systems, it said.

Honda is the nation’s third-largest maker of small vehicles with an engine capacity of 660 cc or less, after Daihatsu Motor Co. of the Toyota group and Suzuki Motor Corp.

Demand for smaller vehicles, which account for more than one third of Japan’s automobile sales, is rising due to higher fuel prices.

The Nikkei said Honda also aims to use the new facilities to build up expertise in producing low-cost, high-quality small vehicles to sell in emerging markets in the future.

No comment on the report was available from Honda on Sunday.