Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Japanese automaker Honda plans to shift a part of its production capacity from the UK to Japan amid weak auto sales in Europe, according to local media reports. The plant is Honda’s only production base in Europe. 


Honda will move production of the Civic model from Britain to Japan and shut the Swindon plant in southern Britain in 2021. The Swindon plant has an annual capacity to produce 160,000 Civic cars of both petrol and diesel variants. The unit produces cars for the British and North America markets. Part of the production will be shifted to its Yorii plant in Saitama near Tokyo, which has an annual capacity to build 250,000 units, while cars for the North American market will be produced locally.


The company has earlier stated that its restructuring its operations to focus more on launching electric vehicles amid stricter emission regulations and lower demand for diesel cars. The decision is also all in line with Honda’s sales breakup with more sales in China, Japan and North America than in Europe. 


Honda’s decision on producing cars in Europe will also hinge on the auto tariffs deal which is expected to be seal later this week. 


Auto tariff deal

Japan and the UK are finalizing a deal to waive off import tariffs on auto and auto component by 2026. Japan is seeking an early phase-out of tariffs which seems highly unlikely. In 2018, the European Union (EU) and Japan signed a trade deal which reduced duties on car imports to zero from 10pc by 2027 in exchange for a reduction of duties on European food and wine exports to Japan. After Britain quit the EU in January, a similar deal with the UK is important for Japanese automakers. 


Auto steel consumption

Even before the COVID-19 pandemic, European steelmakers were struggling with lower automotive steel demand. The apparent steel consumption in the EU fell by 5.3pc in 2019 from the prior year. Post-pandemic, Eurofer expects steel consumption to lag until early 2021 as demand from steel-using sectors, auto, in particular, remains weak. 


Auto production activity in Europe fell 16pc in Q1 2020, which is the sixth consecutive quarterly year-on-year. Weak demand for passenger cars in European markets and key export markets forced automakers to cut production. According to Eurofer estimates, auto output will remain low through 2020 with an annual drop of 26pc, while the output is expected to rebound by 25.3pc in 2021.

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