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Honda to Rollout Acura in China

Zacks Equity Research

Honda Motor Co. (HMC) plans to roll out Acura cars in China within three years in order to tap the burgeoning demand for cars by an affluent class of people in the world's biggest auto market.

Honda is trying the produce the vehicle with a local partner Guangzhou Automobile Group Co in order to avoid high tariffs charged on imported cars in China. However, it has not yet revealed any details regarding the size of production capacity or the model it plans to produce.

However, a Beijing-based Honda spokeswoman revealed that the new Acura in China would probably be a compact sports utility vehicle (:SUV) that has not yet presented by the company in the brand’s product lineup. It could be based on a “concept” model -- the Acura SUV-X -- that has been showcased at the Shanghai auto show in April.

Apart from Honda, other prominent automakers such as General Motors Company (GM) and Nissan Motor Co. (NSANY) are focusing on new vehicle launches in China. Recently, GM has begun producing Cadillac cars while Nissan Motor is building a plant in the eastern city of Dalian to rollout some models for its premium Infiniti brand.

After months of sluggish growth owing to weak economic conditions and restrictions imposed by the government on new vehicles, total vehicle sales in China reflected a steady growth of 11.2% in Jun compared with 9.8% in May, according to the China Association of Automobile Manufacturers (:CAAM).

A total of 1.8 million vehicles were sold in the country during the month, leading to sales of 10.8 million vehicles for the first half of the year, up 12.3% on a year-over-year basis. Passenger vehicle (cars, multipurpose and sport-utility vehicles) sales also increased steadily by 9.3% to 1.4 million units in Jun compared with 9.0% in May. For the first half of the year, passenger vehicle sales rose 13.8% to 8.7 million units.

The steady growth in sales was mainly attributable to lower prices, which partially offset the effect of shortage of credit, weak economy and government restrictions on vehicle registration due to increasing traffic congestion and pollution in Chinese cities.

Currently, shares of HMC retain a Zacks Rank #5 (Strong Sell). Among the Japanese automakers, Fuji Heavy Industries Ltd. (FUJHY) with a Zacks Rank #1 (Strong Buy) is performing well.

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