October 28, 2015 / 2:45 AM / 2 years ago

Honda to meet China sales targets, but outlook uncertain: CEO

Honda Motor Co President and CEO Takahiro Hachigo speaks during an interview in Tokyo October 27, 2015. REUTERS/Thomas Peter

TOKYO (Reuters) - Honda Motor Co (7267.T) is confident it can achieve its 2015 sales target of 950,000 cars in China, but is cautious about increasing production in the world’s No.2 economy given the uncertain economic outlook, Chief Executive Officer Takahiro Hachigo told Reuters.

“I’ve been hearing from the local market in China, and judging from what they say and also looking at our sales figures through September, it looks like we will achieve our sales goals this year,” Hachigo said in an interview.

But he added that “there is uncertainty” in the outlook for China, and he expected sales growth to slow. China has been a profit engine for automakers around the world, but demand for new cars has been hit by a cooling economy and a plunging stock market.

“Given these circumstances, when you think about increasing production capacity, we have to be extra careful because in some parts of China there’s already excess supply,” said Hachigo, who took the helm at Japan’s No. 3 automaker in June.

Honda has said its two production centers in China already have more capacity than required to meet its sales targets, while overall global production for the year ending March is running at 5.6 million vehicles, well ahead of its sales target of 4.8 million vehicles this year.

Earlier this month, Honda said its sales in China since the start of the year had climbed 34.1 percent year-on-year to 694,807. Sales revenue in Asia, including China, accounted for roughly one-quarter of total revenue last year.

Honda shot up the ranks of the global auto industry in the 1970s with its emissions-reducing CVCC engine and its Civic and Accord models, which were lauded in overseas markets for their ease of driving and roomy, simple designs.

But the company in past years has struggled to replicate its previous successes as a focus on increasing its product lines and raising sales targets stifled research and development, resulting in designs which have been criticized as uninspired and pedestrian.

REGIONAL OPERATIONS

Honda divides its global operations into six regional hubs, including North America, China, India and Thailand, developing products specifically for those markets. Hachigo said he aimed to make those hubs more autonomous, while at the same time improving their alignment within the overall company.

“This coordination is the next step for us to evolve our six-regional operation structure,” he said.

Honda on Wednesday announced it would begin selling its first mass-market fuel-cell vehicle in Japan in March 2016, planning a first-year production run of 200 of the cars which will run on hydrogen rather than gasoline.

The 5-seat sedan, named Clarity Fuel Cell, can travel around 700 kms (435 miles) per 3-minute refuel, and will be priced at around 7.66 million yen ($63,100). It will share the same platform as the company’s plug-in hybrid vehicles.

Reporting by Naomi Tajitsu, Paul Ingrassia and Norihiko Shirouzu; Additional reporting by Maki Shiraki; Editing by Ian Geoghegan

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