CHINA DEMAND BOOSTS HONDA AND NISSAN

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Chinese car-buyers are helping Japan's automobile industry to absorb some of the impact of the worst downturn in decades, quarterly results from Honda Motor and Nissan Motor suggested yesterday.

Honda, Japan's second-biggest carmaker, cited faster-than-expected sales growth in China as it yesterday reported a surprise profit for the three months to June and raised its forecast for the financial year to next March by 38 per cent to Y55bn ($578m).

Nevertheless, Honda saw net profit for the three months to the end of June slump 96 per cent to Y4.17bn, although analysts had expected the carmaker to fall into loss.

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Honda's more optimistic outlook came even as it cut its sales projections for North America, its biggest market, and took a more conservative view of the yen's exchange rate.

Nissan, meanwhile, said its net loss shrank to a smaller-than-expected Y16.5bn in the quarter from Y277bn in the previous quarter, as Japan's third-biggest car producer was helped by aggressive cost-cutting and 28 per cent combined volume growth in China for its Nissan and Infiniti brands.

Nissan announced plans for a Rmb5bn ($732m) expansion of the passenger vehicle plant it operates in Guangzhou with its Chinese partner, Dongfeng Group. A new production line is to begin operating in 2012 and will boost the plant's output from 360,000 vehicles a year to 600,000.

Overall vehicle sales in China surged 18 per cent in the first half of this year to 6.1m, pushing the country past the US to become the world's biggest car market.