CELAYA, Mexico, March 28 (Kyodo) — Honda Motor Co. held a groundbreaking ceremony Wednesday for its new factory near Celaya in central Mexico, aiming to start production there in spring 2014.
The factory in the state of Guanajuato will have output capacity of 200,000 units of the Japanese automaker's main compact model, the Fit. Honda plans to build cars there for markets including the United States and Brazil, Latin America's largest market and one that is expected to continue to grow in the future.
In Mexico, Mazda Motor Corp. has also begun construction of a new factory, situated in Salamanca, also in Guanajuato, aiming to start production in 2013. Nissan Motor Co. is planning to establish a new factory in the country as well.
The series of moves is partly aimed at dealing with the yen's high level of appreciation but concerns have been raised over the hollowing out of Japan-based manufacturing.
The planned Honda factory will be the automaker's second plant in Mexico for full car assembly. The firm, which is investing about $800 million in the facility, plans to employ about 3,200 people, most of whom are expected to be new hires, according to Honda.
"We have high expectations for Mexico," Honda President Takanobu Ito said ahead of the groundbreaking ceremony, adding his company picked the country for the new factory due to its "promising domestic market and high labor quality" as well as the fact that a number of auto parts manufacturers are operating there.
"We would like to make this new factory a hub for our operations aimed at global markets," Ito said.
After the completion of the new factory, Honda's North American production capacity will grow from the current 1.63 million units to 1.87 million units. Honda currently produces the Fit in Japan for the North American market and plans to transfer this production to the new factory in Mexico.
Honda has chosen Mexico partly because the country is a party to the North American Free Trade Agreement with the United States and Canada, and also because of its tariff-free automobile trade pact with Brazil, in addition to its relatively low labor costs in comparison with the United States.
But one concern is a recent agreement between Mexico and Brazil that would limit imports of Mexican-made cars into Brazil for the next three years.
"It is likely to affect our business in Latin America but eventually won't have a big impact," Ito said, referring to the bilateral accord.