Honda seeks to boost its presence in Asia without a partner

Article by Christian Andrei, on August 29, 2010

Honda Motor Co. is not following the trend and won't be seeking to form an alliance with other carmakers as it aims to boost marketing in Asia, according to a top executive. Some of the more prominent tie-ups formed between rival carmakers are Volkswagen AG and Suzuki Motor Corp. as well as Renault-Nissan and Daimler AG.

To reduce R&D costs, these companies are determining ways to share vehicle underpinnings and components. This becomes especially practical since competition has intensified with the spread of cheaper and more fuel-efficient cars.

Fumihiko Ike, head of Honda's Asia & Oceania operations, said that Honda won't be entering into such partnerships after its failed brief capital tie-up with Britain's Rover in the 1990s and an engine supply deal with General Motors Co. several years ago.

Ike informed reporters last Tuesday that while one effective way to lower costs is to aim for bigger volumes, it's actually more complicated than that. He said that it's 'very difficult' for two carmakers to work for a common goal.

The volumes could be met but then, there would likely be 'huge inefficiencies.' Ike, who had been Honda's chief financial officer, said that working speedily alone is more beneficial than gaining economies of scale through a tie-up.

Ike explained that it may be expensive to develop key technologies in-house but it has the advantage of enabling car firms to work with suppliers, lowering parts costs.

He added that the key is knowing how to 'efficiently develop and produce cars' but he believes that when the company is too big, the efficiencies will drop. Meanwhile, Nissan has been reported to be in talks with Daimler to procure large engines from the maker of Mercedes-Benz cars, and to supply the German automaker with electric cars and batteries.

Topics: honda, asia

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