Honda Motor said it plans to buy more parts from Chinese suppliers to cut costs at its auto assembly joint venture with Dongfeng Motor in Wuhan, Hubei province. The Japanese carmaker aims to raise the proportion of components made by Chinese companies to about 15 per cent within three years, up from 10 per cent now, said Mitsuo Yamamoto, a division head in charge of procurement at the plant. That may result in cost savings of about Rmb1,000 per vehicle. Currently, Dongfeng Honda Automobile sources 95 per cent of its components locally, but 90 per cent of them are bought from Japanese and European suppliers.

Honda, Japan’s second-largest carmaker, aims to reduce costs to compete more effectively in China’s rural areas and second-tier cities, where demand for cheap, smaller vehicles is rising.

Honda's cheapest car in China, the Fit compact, is priced from Rmb89,800, compared with Rmb59,800 yuan for BYD’s F3 compact, which was China’s best-selling model last year. The Chongqing factory makes Civic compacts, CR-V sport utility vehicles and Spirior sedans and has the capacity to produce about 1,000 vehicles a day.