Honda Motors is planning to transfer some of the production from its U.K. factory to Japan in response to the falling European economy. The Honda factory in the U.K. is reported to be closed in 2021 as the U.K. is set to leave the European Union (EU). The Japanese and British Governments are in the last stage of talks over winding-up auto tariffs under a trade agreement.

To decrease the foreign exchange risks, Honda had increased the rate of overseas production. However, the automobile company is now planning to increase the usage of domestic plants anticipation of a possible bilateral contract on auto tariffs

Honda will reportedly move the production of its Civic passenger cars to Yorii, northwest of Tokyo from the U.K. Plan in Swindon in 2021.

Japan pays a 7.5% tariff on vehicles to EU countries presently, but as the U.K. has decided to exit the EU, the rate would increase to 10% unless the two capitals, London and Tokyo reach a trade agreement. If the deal is reached the tariff will be reduced in stages to zero by 2026.

In 2019, 11% of the Swindon factory’s output was delivered to the U.K. and 6% to Japan. Honda had announced in the past about its plan to move its production destined for the U.S. market, where about 70% of its output was shipped in 2019. But the firm did not disclose where it decided to move the production for the British or Japanese market. Around 2.3 million vehicles are sold annually in the U.K., making it the 2nd largest market in Europe after Germany. Around 20% of the U.K. market is acquired by the vehicles made by Japanese manufacturers. Honda sold 40,000 cars in the U.K. in 2019, accounting for 1/3 of its unit sales in Europe.

Following Honda’s move, Nissan also canceled its plan to manufacture its X-Trail SUV at the U.K. factory and planned to assemble it at the Kyushu factory.

Source: https://asia.nikkei.com/Business/Automobiles/Honda-to-shift-some-UK-auto-production-to-Japan