Honda resumes local production of City

Honda Cars Philippines Inc. has decided to resume local production of its compact car the City which it had last year begun importing from Thailand along with its mid-range car model the Accord.

This was disclosed yesterday by Arnel Doria, deputy head of marketing of HCPI, who explained that the decision last year to start importing the City and Accord from Thailand was due to HCPI’s focus on producing the then popular CR-V sport utility vehicle.

Unfortunately, with the implementation of the new excise tax system which now taxes Asian utility vehicles (AUVs) and shifts the tax burden to SUVs and luxury cars, the demand for the CR-V has dropped.

Because of the new excise tax system which effectively lowered the taxes of compact cars, the City has now become more affordable to car buyers.

HCPI, thus, deemed it more practical to resume production of the City in tandem with its continuing production of the CR-V and the Civic model.

With the decision to resume local production of the City, only the Accord mordel would continue to be imported from Thailand.

In the past, HCPI locally assembled all four models.

However, since HCPI has only one assembly plant, the plant would have to shutdown and retool for each model.

The decision to import the City and Accord from Thailand was intended to achieve economies of scale for HCPI by limiting local production of just two models.

Based on HCPI data, from January to September last year, average monthly sales of the CR-V was 1,000 units.

However, when the new excise tax system was implemented forcing HCPI to adjust the price of the CR-V, its sales from October to December last year dropped to 212 units.

Previous to the implementation of the new excise tax, the CR-V was classified an AUV allowing HCPI to price the model below P1 million.

With the removal of the AUV exemption, the CR-V is now selling above P1 million.

January 2004 sales of the CRV reached only 251 units.