Honda Plans New Plant in Indonesia - Analyst Blog

By Zacks Equity Research,

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Honda Motor Co. ( HMC ) plans to open a new car manufacturing plant in Jakarta, Indonesia by investing 3.1 trillion rupiah ($337 million). The plant, which will be located in Karawang Industrial Park, will produce small cars like Brio compact.

The plant will have an annual production capacity of 120,000 vehicles, lifting the company's total production capacity in the country to 180,000 vehicles per year. The plant will start operating with a workforce of 2,000 people.

Indonesia has become a manufacturing hot-spot due to its lower wage structure. As a result, many global automakers including General Motors Co. ( GM ), Nissan Motor Co. ( NSANY ) and Toyota Motor Corp. ( TM ) are planning to expand their operation in the country.

Recently, Honda unveiled its plan to build a scooter factory in the country, which will boost its annual capacity to 5.3 million motorcycles. In September last year, Toyota announced its plan to invest ¥30 billion ($388 million) for building an assembly plant in the Jakarta suburbs of Karawang in Indonesia.

With the addition of the plant, Toyota's production capacity in Indonesia will nearly doubled to 200,000 vehicles per year. The plant will start operations from the first half of 2013 and is expected to assemble three subcompact models, including a low-priced strategic vehicle that is under development for the Indonesian market.

Honda, a Zacks #3 Rank (Hold) stock, reported a 41% decline in profits to ¥47.6 billion ($613 million) or ¥26.45 (34 cents) per share in the third quarter of fiscal 2012 ended December 31, 2011 from ¥81.1 billion or ¥45.01 per share in the same quarter of the prior fiscal year.

Revenues in the quarter dipped 8% to ¥1.9 trillion ($25.0 billion), driven by lower revenues due to disruptions in supply of parts caused by the earthquake and tsunami in Japan on March 11, 2011 as well as due to floods in Thailand in the second half of 2011, and due to continued appreciation of yen against dollar.

GENERAL MOTORS ( GM ): Free Stock Analysis Report
HONDA MOTOR ( HMC ): Free Stock Analysis Report
NISSAN ADR ( NSANY ): Free Stock Analysis Report
TOYOTA MOTOR CP ( TM ): Free Stock Analysis Report
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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: GM , HMC , NSANY , TM

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