Contributing to Industries and People’s Daily Lives
in Asia with Honda Power Products

G200 and G150 general-purpose engines produced at TH led the Honda brand in Asia.

In most Asian countries, where primary industries such as agriculture and fishing continue to flourish, power products such as agricultural machinery, outboard engines, and construction equipment were expected to have a growing market, just like motorcycles.
Honda began production of general-purpose engines in Asia in 1987 with production of its G200 and G150 engines at TH, and then began exporting them to neighboring countries. The ME series G200 and G150 engines were introduced in 1977 as general-purpose engines for worldwide use and have represented some of the longest-selling Honda power products. They could also be easily adapted to a wide range of applications, and as power sources for everything from agricultural machinery to construction use. Both models were compact, lightweight and durable engines with resilient and reliable performance with a large amount of low-speed torque. They were also equipped with a rotary breather mechanism that prevented oil leaks, even when used on sloping terrains; a mechanism to keep dust and grass from clogging the intake; an engine stop switch for reliable operation in emergencies; and quiet operation with less mechanical noise, all in consideration of both safety and the environment.
Honda general-purpose engines have come to hold a dominant share of the ASEAN market, and Honda continued to develop various types of power products with high demand in emerging markets, especially in the agriculture and fisheries industries, such as water pumps, trimmers, sprayers, and outboard engines. These products have long helped many people in their lives, and TH led the Honda brand in Asia with both its motorcycles and power products.

General-purpose engine production at TH

Long-tail boat equipped with G200 engine (Thailand)

Local Development of Automobiles in Thailand to Expand
the Target to the Middle Class

Honda began making preparations to expand its automobile business in Asia back in 1983, including the establishment of Honda Cars Thailand (HCT), an automobile sales joint venture in Thailand. In the early 1990s, pickup trucks and other commercial vehicles accounted for the majority of the automobile market in Southeast Asia, however, Honda only sold passenger cars at the time and did not have commercial vehicles to capture the largest market segment.
As Minoru Harada, Chief Operating Officer for Regional Operations (Asia & Oceania) at the time, noted, “The key point of our sales strategy was to try to turn our weakness of only offering passenger cars into a strength. Honda overcame this hurdle by emphasizing the prestigious image it had built up in Asia.”
Local production of the Civic began in the mid-1980s, followed by the Accord in the early 1990s. However, production volume remained small, and this, coupled with such factors as low local content and high reliance on imported parts and components, caused Honda cars to be more expensive than they were in the Japanese market. Still, their high product appeal and the trust they had gained from high-income class greatly helped in boosting sales.
As Asia continued to grow and develop, Honda found its automobile business entering a new phase. Noticeably, middle class incomes had been gradually increased due to economic growth, and Honda was seeing a new group of potential passenger car buyers and a rapid expansion of business opportunity. On top of this, tax reform in Thailand also provided a favorable climate for car sales, as a tax rate applied to passenger cars was lowered beginning in 1991.In 1992 Honda established an automobile production joint venture, Honda Cars Manufacturing Thailand (HCMT), with an eye toward the effect these new trends in Thailand, ASEAN’s market leader, would have when spread to neighboring countries. Honda was about to take a new step forward by starting local Civic production.
Nevertheless, Honda cars were still not priced in a range that the middle class could easily afford. After extensive research, those who were involved in sales operations were convinced that reasonably priced high-quality Honda models that maintain the existing upscale image would sell well. No matter how affordable they might actually be, Honda cars couldn’t be outdated, or have problems with quality or equipment. Like the first-generation Civic, it needed to be a car that customers would really want to drive for themselves. If Honda was to maintain its position in the Asian automobile market over the long term, it needed to introduce a new model which would become the third pillar of the Honda product lineup along with Accord and Civic. As customer needs in Asia were clearly different from those of other regions, developing a new car exclusively for the Asian region ahead of its competitors would surely help Honda expand its market share and solidify its position for the future. Based on this thinking, Honda set out to develop a region-specific strategic car that would give the company greater self-reliance in the Asian market.

Reducing Costs with Ideas Originated in Thailand
and a Parts Procurement System Unique to ASEAN

A number of studies were conducted prior to the development of a new regional model for Asia. Honda spent nearly six months conducting market research in Thailand and other Asian countries to gather all information necessary to establish the product concept and design requirements, including positioning of automobiles, demand forecasts, how target users use automobiles, purchasing power, expectations regarding hardware and features, and even some image of acceptable pricing.
As a result, it was decided that the concept of the new model would be “A car that’s as precious as family,” with a subtitle of “High quality.” Honda also decided that this model would be a 3-box 4-door, 5-passenger compact sedan that would feature a spacious rear seat, easy maneuverability, and an effective air conditioning system. Target users would mostly be middle class first-time new car buyers. Although an affordable price was certainly a must, another non-negotiable point was that the car needed to have a stellar design that would give customers a sense of pride and satisfaction in owning a new Honda sedan. Another decision Honda made was that the vehicle body of this new model would be produced locally in Thailand.
With these basic conditions laid out, the project entered the design stage, but soon hit a major wall. Masami Uemura, a member of Honda R&D Tochigi’s LPL Office, recalled: “According to cost estimates, we’d only be able to lower costs by 4% compared to the Civic. We were stunned.”
Initially, the development team thought that it would be possible to reduce enough cost by making use of established Japanese parts and know-how. However, due to the significant impact of shipping costs, tariffs, and currency effect associated with parts supply from Japan, the desired level of cost reduction was not achievable.
The most important challenge became how to lower costs. In the midst of all these discussions, the development team realized that they needed a major change in thinking. As a result, it was decided not to supply parts from Japan, but to change the vehicle design itself to enable use of parts that can be procured locally. In other words, they came to a conclusion that the best course of action was to abandon any idea from Japan and adopt ideas originating in Thailand.
Efforts to increase local content began in earnest. First, the company held brainstorming meetings with the intent of gathering ideas for the project. The development team listened to the opinions of engineers with extensive experience from being stationed in Thailand, and then reflected many of their ideas in the initial drawings. For example, the adoption of a strut suspension and three-part bumper had its origins in just such efforts. Additionally, in order to develop cheaper parts more quickly, the company visited local manufacturers to actively integrate each company’s requirements.
Establishment of a mutually complementary parts supply system among ASEAN countries played a role in the successful development of the regional model. When the ASEAN Council of Senior Officials approved the plans submitted by an automaker for mutually complementary supply of parts among ASEAN countries, those parts would be recognized as “domestically produced parts,” and thus received the substantial economic benefits of reducing tariffs by half. When the cars and their parts were manufactured in each country, costs would inevitably rise due to the small scale of production. However, if parts could be mutually supplied among ASEAN countries, the effects of mass production would help reduce costs. Moreover, higher quality parts could be procured when each country focused on the production of their “specialty parts.”
Through these efforts, the newly-developed regional model achieved local content of 70%, and realized cost reductions that far exceeded their initial target. Their persistence in pursuing absolute success made the impossible possible.

Building a New, Human-Friendly Plant Equipped
with Advanced Technology in Ayutthaya

HCMT Ayutthaya Plant produced vehicles developed exclusively for the Asian region

The newly developed regional model was produced at HCMT’s new Ayutthaya Plant, which was built while the new model was being developed. This automobile production plant was built to bolster product supply capacities in anticipation of the future expansion of the Thai automobile market. It was also expected to play a central role in Honda automobile production in Asia. Construction was carried out at a rapid pace while working to reduce cost by making the most effective use of stamping machines transferred from Japan and the procurement of all overhead cranes in Thailand. By March 1996, production of the new regional model began on schedule.
The Ayutthaya Plant also played a major role in local procurement of parts for the newly developed model. For example, the plant took on the challenge of producing stamped parts locally, such as front fenders and trunk lids, which were considered difficult to make even in Japan. This was the first full-scale manufacture of exterior passenger cars panels in Thailand. It was a difficult goal, but with single-minded determination and the steady efforts of everyone involved, Honda was able to achieve it together with the people of Thailand.
Moreover, the Ayutthaya Plant was constructed with the key concept of a “human-friendly plant” that would pay due consideration to production associates, the natural environment, and ultimately the local community. Its paint facility was designed with high ceilings and insulation to keep out the outside heat, and the paint booths where high heat would be generated by dryers and other equipment were located far away from areas where most associates were working, making the entire plant more people-friendly. Additionally, environmental measures were proactively taken, including the installation of Asia’s first exhaust gas measurement lab equipped with a 75kW chassis dynamometer.
Furthermore, to ensure the world’s top-level production quality, the Ayutthaya Plant featured the finest technologies, including advanced production equipment and newly devised production processes.
Takehisa Suzuki, an advisor to the Regional Operations (Asia & Oceania) at the time, recalled: “The idea of a human-friendly production plant also enhanced the image of the products actually made there. Furthermore, the experience of building a plant in Thailand for the people of Thailand while constantly refining it to better conform with the local culture, undoubtedly served as a model for future business expansion in Asia.”
The stamped outer panels and vehicle frame components of the newly developed model produced at the Ayutthaya Plant were later exported to Malaysia, the Philippines, Indonesia, Pakistan, and Taiwan. Subsequently, the plant also played a significant role as a base of operations for supplying parts to other Asian countries.

The City: A Best-Seller Model Originated in Asia

In April 1996, a newly developed family sedan from Asia, the City, was launched with great fanfare. It was priced at 398,000 baht and was large enough to comfortably seat an entire family, yet its price was 30% less than that of the Civic. This price setting was highly attractive to customers purchasing a passenger car for the first time. As a result of thorough cost reduction in every area of production, from local parts procurement to production methods, Honda was able to achieve excellent quality at affordable prices for enthusiastic customers who were looking to buy a new car.

City, being developed and produced in Asia

Recovery from Natural Diesters
and Implementation of the 3+1 Strategy

The Great East Japan Earthquake and tsunami devastated northern Japan on March 11, 2011, and the impact of this unprecedented disaster was not limited to Japan, as the HATC Ayutthaya Plant also experienced disruptions in its supply of parts and components from Japan. Just as it seemed that the plant was finally recovering from this turmoil, torrential rain and flooding suddenly hit Thailand. The floods began in July in northern Thailand, and gradually grew in scope to reach the capitol city of Bangkok in October. The devastating flood submerged the Ayutthaya Plant in a 2.5-meter-high surge of water. Production facilities were almost completely destroyed, and more than 1,000 finished vehicles had to be scrapped due to damage from the flooding.
The manager of the Ayutthaya Plant at the time, Mr. Pirapat K., recalled: “Everything in the plant was underwater, and the whole area looked like an ocean. I thought that Honda would have no choice but to withdraw from Thailand.”
While many of the local associates were worried about losing their jobs, Hiroshi Kobayashi, then president of HATC, quickly gathered all the associates, and gave them some timely and much needed encouragement by saying: “HATC will not lay off anyone. We will keep everyone employed, so please don’t worry. Let’s join forces to restore our plant operations and normalize our daily lives as quickly as possible.”
Inspired by these words, all HATC associates, including new and experienced, Thai and Japanese, came together to rebuild the operation with their own hands. In a cramped space on the second floor that had escaped the floods, they worked out a recovery plan and labored around the clock to pursue various recovery measures, while scrambling to rearrange production equipment and remove all the oil that had polluted the plant.
As a result of dedicated work of all associates, in March of 2012, sooner than expected, Ayutthaya Plant resumed production.
Despite such a timely recovery, the suspension of operations at the Ayutthaya Plant had a significant impact on other Asian countries. Parts supply was disrupted, leading to factory shutdowns, which was a major blow to Honda automobile business in Asia. However, based on its 2020 Vision of never missing a growth opportunity in emerging countries, Honda launched the “3+1 strategy” to strengthen and expand its automobile business in Asia, with a main focus on Thailand, Indonesia, Malaysia, and India. The strategy was to accurately gauge user needs in such rapidly growing Asian markets, cultivate new markets and customers by acting faster than competitors, and expand production and sales of Honda products in each market.