Honda’s Local Venture Gears Up For Massive Electric-Car Production

Japanese automaker Honda Motor Co. and its local partner, GAC Group, are set to invest about 3.3 billion yuan ($473 million) to ramp up production of new-energy vehicles in the world’s largest auto market.

Their local joint venture, Guangqi Honda Automobile Co. Ltd., will pump 3 billion yuan into setting up new facilities, with the remaining capital to be used to remodel an existing factory. All plants are slated to make new-energy vehicles, the Guangzhou-based automobile group said in a filing (link in Chinese) to the Hong Kong Stock Exchange on Wednesday.

Guangqi, created in 1998, currently has two factories in the southern city of Guangzhou.

With the new investment, Guangqi will have an annual capacity to produce 170,000 new-energy vehicles, the filing said. It didn’t say when production at the new plants will begin.

“New-energy vehicle” is a term that encompasses all-electric cars, plug-in hybrids, and hydrogen vehicles.

The investment also marks the companies’ joint effort to meet a government quota system that will require traditional automakers to add new-energy cars to their sales mix.

Under that program, which is set to take effect in 2019, automakers must obtain a certain amount of credits that are linked to how many new-energy vehicles they sell. The score quota is 10% in 2019, rising to 12% in 2020. Some analysts have expected that a 12% quota for such vehicles would translate to 4% to 5% of automakers’ annual vehicle sales.

Many big global automakers have since stepped up their efforts to meet the mandate. In May, Volkswagen Group said it was opening three new factories in China with its local partner, as part of the German carmaker’s plan to deliver up to 1.5 million new-energy vehicles to the Chinese market annually by 2025.

In June, General Motors Co. said it will launch 10 more new-energy vehicle models in the country from 2021 through 2023. The U.S. automaker currently offers three such models here.

China is the world’s largest electric car market, with new-energy vehicles sales during the nine months through September nearly doubled to 721,000 units, according to China Association of Automobile Manufacturers. That sales list has long been dominated by domestic companies, and no foreign brand has made it into the top 10.

Contact reporter Mo Yelin (yelinmo@caixin.com)