Honda overhauling its sourcing strategy to better compete with Hyundai

Article by Christian Andrei, on September 22, 2010

Honda Motor Co. will scrap its one-spec-fits-all method as it moves to overhaul its sourcing strategy. According to Masaya Yamashita, head of Honda's purchasing operations, this is being done on global car models to make them more competitive against Hyundai Motor and other carmakers in emerging markets.

Until now, Honda had been using a common blueprint for components on cars built and sold globally in order to raise efficiency. It was also done so that consumers throughout the world would receive the same specifications for those models. 

Yamashita said that this strategy is outdated and only makes some of the models more expensive in China, India and other regions especially at this time when sales of Hyundai and other competitors are increasing as they sell cars that fit the needs of local consumers better.

In a Reuters interview, Yamashita said that its rivals are growing fast “because they're looking at components from a new angle.” He explained that the old stereotype had been that cheap vehicles offer lower quality but that this isn’t the case now.

He said that Honda would have to operate with a brand new standard for components. Honda’s plan to create several different blueprints on vehicle components is expected to cut purchasing costs on the next-generation Fit subcompact, one of its top sellers, by about 20 to 30% in emerging markets.

He said that the first car to be equipped the new sourcing method is the fully remodeled Fit, which is set to arrive at around 2012 or later. For example, the Fit (named the Jazz in Japan, China, India, Thailand, Indonesia, Britain and Brazil) currently uses the same design and materials for most components in all seven countries.

But this leads to high costs as this means that the components have to meet the highest common denominator for specifications. [via autonews - sub. required]

Topics: honda, hyundai

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