As the largest Japanese joint venture brand in China, Honda has created an incomparably dazzling brilliant record. However, in the past 30 years, Honda has had to close a number of factories in China and cut its production capacity by 490,000 units as sales continue to plummet. How long Honda can survive in China, only time will tell.
1. Will the closure of the plant reduce production capacity by 490,000 units?
In the past, in the Chinese market, Honda used to be almost a "god-like existence", and many Chinese people admired "Honda Dafa" very much. However, now Honda in China has plummeted, even to the point of closing the factory. According to reports from Reuters, Nikkei and other media, Honda will reduce its production capacity in China from 1.49 million units to 1 million units through measures such as closing factories. This reduction is equivalent to 30% of Honda's production capacity in China and 10% of its global production capacity. Honda's production cut will be the largest among Japan automakers.
As a first step in reducing production, Honda recently announced that it will close or stop production at two of its seven gasoline vehicle plants in China. Among them, Guangqi Honda's plant in Guangzhou, which will be closed in October. The plant, which was built 20 years ago, mainly produces the Accord, a B-segment sedan, with an annual production capacity of 50,000 units. In May this year, Guangqi Honda launched a large-scale layoff operation, and it is reported that 2,300 employees have left. In addition, Dongfeng Honda's Wuhan plant, which has an annual production capacity of 240,000 units, will be halted from November. After the adjustment, Honda's production capacity in China will be reduced from 1.2 million units.
2. Sales plummeted by nearly 400,000 units in three years?
Behind the drastic reduction in production capacity is Honda's sales in China from brilliant to lonely. Among the three Japanese masterpieces of Honda, Toyota and Nissan, Honda was the first to establish a joint venture in China. In 1998, Honda and GAC jointly established GAC Honda; In 2003, a second joint venture, Dongfeng Honda, was born. With phenomenal models such as the Fit, CR-V, Accord, and Odyssey, Honda has been favored by Chinese consumers, and its sales have been rising. In 2020, Honda sold 1.627 million units in China, surpassing Toyota and Nissan, becoming the best brand of Japanese cars in China.
Unfortunately, under the drastic changes in the market environment, Honda's sales in China began to decline year by year. From 2021 to 2023, Honda's sales in China will drop to 1,561,500 units, 1,373,100 units, and 1,234,200 units, respectively. Obviously, in just three years, Honda's sales in China have plummeted by nearly 400,000 units, a year-on-year decline of more than 23%. Heading into 2024, Honda's sales situation continues to deteriorate. In June this year, Honda's sales in China were less than 70,000 units, a year-on-year decrease of nearly 40%. In the first half of this year, Honda's cumulative sales in China were only 415,900 units, a year-on-year decrease of 21.5%. At the same time, Honda's revenue in China is also declining year by year.
3. Japan's largest joint venture brand fell off the altar?
In China, the world's largest automobile market, Honda, the largest joint venture brand of the Japanese family, has gone from incomparable glory to falling from the altar in just three or four years, which can not help but make people sigh. The most fundamental reason behind this is that under the impact of new energy vehicles of local Chinese brands such as BYD, the core selling points of Japanese traditional fuel vehicles such as Honda have gradually disappeared and have been eliminated by the times. On the new energy development route, Honda was stubborn in promoting gasoline-electric hybrid technology in the past, and neglected the research and development of pure electric and plug-in hybrid technology, resulting in its new energy vehicle products falling far behind in the competition with Chinese brands such as BYD.
However, Honda did not rest on its laurels and began to accelerate its electrification transition in order to win a second spring in the Chinese market. For example, Honda's current production reduction is actually a strategic adjustment of its production capacity to focus on electrification transformation. While closing a number of factories to reduce production of fuel vehicles, Honda is also building new energy vehicle plants in China. Among them, Dongfeng Honda's new energy plant will be put into operation in September this year; Guangqi Honda's new energy plant will start production in November this year. By then, Honda's annual production capacity in China will be restored to 1.44 million units.
As a pioneer, BYD and other Chinese new energy brands have not only broken through the technological blockade and patent barriers of developed countries such as Europe, America, Japan and South Korea, and have the core technology of the whole industry chain such as the "three electrics" of new energy vehicles, but also have the right to define and price new energy vehicle products. Although Honda and other automakers hope to cope with the sales dilemma by reducing the production of gasoline vehicles and focusing on electric vehicles, the task of transforming Japanese cars is still quite arduous as the competition in China's new energy vehicle market becomes more and more intense. It remains to be seen what Honda's future holds in China.