Honda Plant in Melaka 75% Completed
The new Honda plant being constructed in Pegoh, Melaka, is progressing on schedule and is 75% completed. It will commence trial production by October this year and mass production from December 2002. The installed capacity is 20,000 units a year but it is understood that, in the first year of operation, only 10,000 units will be assembled.
The first model to be assembled there will be the latest Honda CR-V as this is in greatest demand. At present, all Honda models are assembled at Oriental Assemblers (OA) in Tampoi, Johor. However, since DOH was established last year with Honda Japan having a 49% equity, the Japanese automaker has decided that it wants an assembly plant of its own.
After the CR-V, other models will be transferred progressively from OA (which also assembles Hyundai and Mercedes products). By 2004, a total of four models will be assembled at the plant.
According to a source in DOH, Honda wants to offer its customers the highest possible world-class quality vehicles and by having its own plant, it will be able to introduce processes and equipment that can ensure that kind of quality. Additionally, it is believed that there will be a high degree of automation, further contributing to consistency in build quality.
Nevertheless, human resources will be still a major component in the plant and in connection with this, DOH has signed a Memorandum of Understanding (MoU) to send its new plant employees to Institut Kemahiran MARA (IKM) located in Jasin for basic skills training in automotive subjects.
DOH has spent RM1.7 million on staff training programs so far and will be spending RM200,000 on 145 employees who will be the first batch to receive training at IKM Jasin.
Last year, when Honda announced that it would set up a new assembly plant in Malaysia, the decision was a significant one which showed that although Malaysia had deferred opening up its auto sector under AFTA, at least one global automaker did not ‘write it off’ for further investments. In any case, the plant is designed to be expanded in future and when Malaysia’s auto sector is liberalised and vehicles can be exported/imported at AFTA tariffs, the plant will certainly become an integral part of Honda’s ASEAN production arrangement. In this arrangement, which a number of manufacturers have or will adopt in the near future, specific models will be assembled in each country for export around ASEAN.
At this time, Honda is already making the Stream in Indonesia and plans to export it around the region from 2003, when AFTA kicks in. Quite likely, the City (or its successor) will continue to be primarily made in Thailand while Malaysia, being the largest passenger car market in ASEAN, will probably get the Accord and Civic, while the CR-V could be done in the Philippines.
The idea of distributing assembly of models is to achieve the all-important economies of scale for each plant. Instead of doing, say, 12,000 units of CR-V in each plant, one plant can do the model for all the countries and at a much higher volume. This will mean lower production costs which can be passed on to consumers in the form of lower pricing. And that is what AFTA is about – to create a single market with larger volumes so that manufacturers can produce things in a more cost-efficient manner, ultimately benefitting consumers in all the countries.
