Industrial Sectors: Auto Parts : Honda and the auto parts industry in China

Abstract In automobile manufactures, the cost of the power control is estimated to share about 20% of the total production cost and more than 30% of the profit . Compared with other auto companies in China, Honda and her Chinese partner Guangzhou Automobile Group (GAC) are reported to have the highest per car profit margin. This is largely earned from the margins gained in the auto parts procurement in China. It is estimated that up to 80% of the total production cost of Honda’s automobiles and motorcycles is spent on the sourcing of the auto parts  and the local sourcing rate of Honda is one of the highest in the industry up to 78% in some car models. These include the sourcing of the assembled power engines and transmissions from Honda’s own subsidiaries in China via intra-firm trading and from the first-tier suppliers that have long business relations with Honda to follow and build supplier plants within the vicinity of Honda’s assembly plants in China. When Honda was beginning to globalise its production bases in key regional markets in the 1990s, the building of local auto parts production bases within the vicinity of the assembly plants is an important strategy. In China Honda has, compared with her competitors, a high in-house and local sourcing ratio in her manufacturing bases enabling direct control over the costs and the smooth running of the Honda lean production.
Author ITUC/GUF Hong Kong Liaison Office (IHLO)
Attachment Sorry, no attachments exist.
8 Energy Intensive Industries, 8.5.4 Automobile