2. Business diversification (1) Motorcycles and electronics products

[1] Producing magnetos at Honda Motor in Manaus, Amazonas

As the capital of the state of Amazonas, Manaus is the largest city in the northwestern part of Brazil. Because it is located in the Amazon rainforest, however, it is truly a remote landlocked island, with the only means of transportation being airports and waterways. Although the area flourished as a natural rubber collection and distribution center from the 1890s to the 1910s, after rubber tree seeds were taken to England and high-quality, low-cost rubber started to be collected from plantations in Southeast Asia, Amazonas entered into a period of steady decline and depopulation.
In 1967, the Brazilian government established a preferential tax zone in Manaus (Manaus Free Zone). This move triggered a series of efforts to attract industry to Manaus, which had been in constant decline. Today, nearly 40 Japanese companies, including Honda Motor, Yamaha and Panasonic, have established operations in Manaus.
This preferential tax zone was established for the following three purposes.

1. Strengthen defense of the Amazon basin, which borders neighboring countries
2. Develop the untapped Amazon Basin, where vast natural resources lie dormant
3. Develop domestic industries to replace imported products with domestic products

In the early 1980s, Moto Honda da Amazonia Ltda.(Moto Honda), which handled Honda Motor’s Brazilian motorcycles business, approached NDBC about producing and supplying magnetos. Because it was ineligible for the tax incentives, however, the cost of NDBC’s magnetos was too high. Consequently, Honda Motor ordered a production line and 90% of CKD parts from DENSO, and began producing magnetos at its own plant in Manaus in 1982. Along with the expansion of the motorcycles market, Moto Honda subsequently enlarged its plant, with DENSO also providing visiting support whenever new model production was launched.