Honda Begins Producing Cars in Argentina

The Honda Motor Company officially unveiled a plant in South America that focuses on the production of compact cars for the national and international markets.

Since 2009, more and more pressure has been placed on Honda to supply cars to this market. Because of this fervent local and international demand, in 2010 the automobile industry in Argentina produced approximately 700,000 cars–40 percent more than in 2009. Most of the cars exported from Argentina are shipped to Brazil, and exports increased almost 40 percent last year as well. Before the factory was opened, Honda transported the cars it made in Brazilian and Mexican factories to meet the demand in Argentina. The company believes the plant will be a major player in the South American economy. In addition, almost two-thirds of the 20,000 cars that are produced by the factory from 2014 to 2015 will be shipped to other countries.

Cristina Fernandez, the Argentine President, said that this factory could help Honda increase its output. It has been speculated that Honda has spent $210 million on the plant already. Officials believe that the company plans to invest $40 million more by 2012, although an official number has not been confirmed by Honda.

Honda initially publicized its intentions to construct the factory almost three years ago but put off its opening because the company did not believe demand in South America was high enough, especially during the recent worldwide economic downturn. But the President of Argentina had been restricting the importation of automobiles to boost the local economy and protect its own manufacturing industries. Argentina’s automotive industry provides jobs to many blue-collar employees.

Currently, nine car manufacturers and suppliers have signed import-export contracts and have promised to augment their distribution of automobiles and car parts. Even Porsche, which does not participate in the automobile manufacturing industry in Argentina, will export other commodities in exchange for the cars it expects to import in 2011.

Although more than 3,000 cars made by BMW were sold in Argentina in 2010, the country’s limitations on imports have caused BMW to stop exporting cars to Argentina. The country’s crackdown on importation has been controversial. Perhaps as a reaction to Argentina’s importation restrictions on Brazil’s exported goods, Brazil, a major trading partner with Argentina, has also placed restrictions on imported vehicles. These two major South American economies are currently working to settle this clash in trade ideology.