Honda to relocate, expand assembly plant

Bullish on the prospects of the Philippine motorcycle market, Honda Philippines Inc. will spend over P2 billion for the relocation and expansion of its assembly plant in the country to further solidify its dominant position in the industry.

Honda is choosing between Calamba and Sta. Rosa, Laguna as its new relocation site. To rise on a 50-hectare property, the new factory is expected to increase the firm’s production of motorbikes to half a million units a year from the current 156,000 units.

Honda consultant Mateo Ocenar said the move is in anticipation of stronger demand for motorbikes. The industry expects to sell one million units within the next five years and is projecting an 18-percent increase in its sales this year to 250,000 units.

To finance the purchase of its new site, the company will sell its three-hectare property in Bicutan, which currently houses its assembly plant.

Ocenar said the government’s help would be vital to the growth of the Philippine motorcycle industry, which has lagged behind markets in China, Thailand, Indonesia and Malaysia in terms of unit sales.

Thailand sells an average of 1.5 million units a year, Indonesia (1.9 million units) and Malaysia (475,000 units).

Local assemblers have complained about the influx of Chinese motorcycle brands that are being dumped in the country and sold at prices substantially lower than the domestic price. China is seen as the biggest threat to the local motorcycle industry with the mainland’s market of 10 million units a year.

To protect them from undue competition, local assemblers have asked the government to maintain tariffs on imported bikes at 30 percent through 2010 to rev up investments in the industry.

Maintaining the tariff protection levels would give assemblers more time to improve their operations before they face imports.

The Motorcycle Development Program Participants Association has also sought for reduction in the tariff on completely knocked down (CKD) imports to one percent from three percent in order to lower the cost of importing their assembly kits.

Apart from this, local assemblers have asked government to limit the entry of new market players, pointing out that the increase in number of competitors fighting for a small market would discourage investments in assembly and parts manufacturing in the country.

Ocenar said existing players are already facing stiff competition from motorcycle imports including the smuggled units whose share of the market has risen to 30 percent.

Local assemblers have blamed the Department of Trade and Industry for allowing Chinese motorcycle brands and second-hand units to penetrate the Philippine market through slack registration requirements.

The industry is currently served by seven players led by Honda, Kawasaki, Yamaha and Suzuki. – Zinnia dela Peña