Honda Civic bids Philippines goodbye – for now

Rappler.com
Honda is transferring its assembly of its new generation Civic sedan to Thailand due to economies of scale

MANILA, Philippines – The Laguna assembly plant of Honda Cars Philippines Inc. (HCPI) has started humming again after supply issues due to Thailand floods halted operations for almost 4 months.

But while locally assembled units of compact car Honda City will start rolling out in a couple of months, one car model that used to come out of the Laguna plant will be sorely missed: Honda Civic.

Honda recently unveiled the 9th generation Civic, a popular sedan, which was imported from Japan as a completely built up unit.

Honda Civic will be the 3rd car model whose assembly process will be shifted from the Philippines to Thailand. The two others were Mazda 3 and Ford Focus.

HCPI president Tatsuya Natsume attributed the carmaker’s recent decision to economics. 

Economics

“It’s a matter of economics of scale,” Natsume said in a recent interview with reporters

He pointed out 2 aspects that explain why Thailand has economics of scale: existing manufacturing capacity and a sizable local demand.
 
Just like a couple of car manufacturers who want access to over 600,000 Southeast Asians, Honda was also lured by Thailand’s investment-friendly policies, which have since spawned pockets of locations outside Bangkok as “Detroit in Asia”

Honda’s plants in Thailand has a capacity of 240,000 units per year.

This dwarfs Honda’s Sta. Rosa plant in Laguna, which can produce only up to 10,000 units annually.   

That these cars are snapped by local buyers, too, is a carrot to carmakers, which have the option to export their units tariff-free around the region.

Thais buy a total of over 800,000 units a year. Filipinos, on the other hand, have been buying around 142,000 vehicles only.

Missed opportunity
 
The fate of vehicle manufacturing in the Philippines is the latest in the string of missed opportunities for the country.   

Thailand’s devastating floods and Japan’s twin disasters of earthquake and nuclear crisis, all in 2011, have made manufacturers in Asia rethink their production and supply strategy.

Moving entire vehicle units and parts have been relatively cheap around Asia, which has slashed tariff to zero.

The Philippine was initially poised to take advantage of the ASEA free trade opportunity, hoping to stimulate economic activity by attracting more investors in local production and generate jobs.

However, the Aquino Administration decided to shelve the government’s Comprehensive Motor Vehicle Development Program pushed by former President Arroyo

The program had inspired Ford Philippines to set up an assembly plant in Laguna that would ship out entire units to other markets in Asia. Ford is the Philippines’ only car exporter.

The Aquino government said the program has failed to expand the export volumes of completely-built-up exports and shipments abroad were limited to parts such as wiring harness and transmissions.

Amid these and other factors like high electricity costs in the Philippines, Honda’s decision to temporarily import Honda Civic units from Japan is just a stop-gap measure.

The car maker’s vote still went in favor of Thailand. Assembly of Honda Civic will resume in Thailand when the post-flood issues subside.

Alternative

Just like Ford, which will keep its assembly operations in Laguna for its Ford Escape units, Honda will also maintain its Laguna factory for its Honda City units.

“Even though we are discontinuing the Civic, we will keep our employes and our factory,” Natsume said.

“The City will fill up the capacity left by the Civic. It’s better to concentrate on one model and be more efficient,” he added.
 
He said sale of Honda City is now much higher than the Civic which used to be its  HCPI’s bestseller model and is its flagship model.

In better years, Civic was selling a record of 9,000 per month, which is now the average sales of the City.

For the new Civic, Natsume said HCPI is targeting just 350 units.

The 9th generation Honda Civic replaces the previous model launched in 2006. The new model would retail at P1.074 million, 6% more expensive than its predecessor. – Rappler.com

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