January 20, 2010
Honda Motor's Chinese venture Guangzhou Honda is set to introduce its cheapest car to follow the automotive trend in the China market, and to benefit from the government's sustained support for small vehicles, media reported.
The car, developed by Honda and local partner Guangzhou Auto Group, will have an engine smaller than 1.6 liters and sell under a new China brand Li Nian. "The under-1.6-liter mass-market segment is really hot [in China] right now," said a Honda executive. "We see Li Nian as the product that will be able to compete in this range."
Last year, China overtook the U.S. as the world's largest auto market and sales growth in rural areas exceeded that of urban regions for the first time. Honda's City and Fit compact models, both with engines below 1.6 liters, have faced competition in China from Nissan's cheaper Livina model, said Bloomberg News.
Nissan outsold both Honda and Toyota in China last year, as demand for Nissan's vehicles surged 39%. The Chinese government reduced the sales tax on new vehicles with engines of 1.6 liters or smaller to 5% from 10% one year ago. This incentive continues this year, though the rate was rolled back to 7.5%.
Li Nian, which literally in Chinese means "ideal" or "spirit," is the first original brand developed between a foreign automaker and local joint-venture company in China, according to Honda.
Honda operates another joint venture in China with Dongfeng Motor Group. The JV plans to lift its production capacity at its Hubei plant to 240,000 vehicles this year from 200,000.
source: Guangzhou Honda to launch new small car Li Nian - China automotive news