Honda, hit by a dramatic appreciation in the yen, does not expect to be profitable in Europe until 2013-14 when 80 per cent of cars sold will be sourced from its British plant, its regional president said.
Despite two straight years of losses and a market share of just over 1 per cent, Honda Europe President Manabu Nishimae said the carmaker had no plans to exit what is regarded as a fiercely competitive market crowded by competitors offering margin-eroding incentives to chase declining volumes.
“The European car market is all about high technology and beautiful design, both for the exterior and interior. So our reputation among European customers affects demand in other regions,” he said.
To better weatherproof the brand in Europe, Nishimae said he was looking every day for ways to cut its exposure to the yen, which finished off 2011 at a 10-year high to the euro.
Imports into Europe presently make up 40 per cent of Honda’s sales in the region, including all Honda Accords, rendering many of the vehicles uncompetitive at current yen rates.
“In Japan we will focus on the production of small and mini vehicles for the Japanese market,” he said.
Nishimae said he wants to reduce imports to 20 per cent or less as soon as the company doubles annual output in its Swindon plant in Britain to nearly 180,000 vehicle this year.
Honda also is considering whether to import Accords from the United States in the future, which could potentially cut down shipping times to about seven days from over four weeks.
Nishimae additionally plans to hire more engineers to help inspect and certify the quality of European suppliers, from which Honda could then procure components. Only about 60 per cent of the auto parts Swindon currently sources are from Europe.
“We are trying to increase local content month by month, even day by day. That’s why we would like to increase our R&D employees -without doing so it’s going to be difficult to expand local procurement,” he said.
After missing out on sales of an extra 22,000 cars in 2011 because natural disasters in Japan and Thailand tore a hole in its supply chain, Nishimae expects sales this year to jump by around 25 per cent to 198,000 vehicles in a market estimated to shrink.