Honda will close three factories in China and cut 33% of its production capacity for gasoline vehicles in China!

Xinzhixun

2024-07-26 12:12Posted on the official account of Guangdong Xinzhixun

On July 25, according to the Nikkei News, due to the acceleration of the Chinese auto market to new energy, Honda plans to reduce its fuel vehicle production capacity in China by one-third, equivalent to about 10% of its global production.

According to the report, Honda will close three of its seven production lines in China, reducing its annual production capacity of fuel vehicles from the original 1.49 million to 1 million, that is, about 490,000 volumes, or about 33%. This is also the first time that Honda has implemented large-scale production cuts in the Chinese market, and it is also the largest production reduction by a Chinese and Japan automaker during the current economic downturn.

According to the plan, one of Honda's plants in Guangzhou, Guangdong Province, will be closed in October, another plant in Guangzhou will be closed or suspended, and the plant in Wuhan, Hubei Province, will be shut down from November. Honda is currently in talks with its joint venture partners, GAC Group and Dongfeng Motor Group, and is expected to make a formal decision as early as this year.

It is worth mentioning that in May this year, Nikkei Asia reported that Honda Motor is reducing its full-time production staff in China due to declining sales, and about 1,700 workers have agreed to leave their jobs, accounting for about 14% of its total production workforce. In addition, Honda may also reduce the number of days of operation at its factories in June.

According to the data, Honda has been expanding its car production capacity in China since the 1990s, which has also made China the largest manufacturing center for Honda cars. Honda's sharp cuts to China's production capacity come at a time when local companies are expanding production faster than demand is overcapacity, prompting Chinese automakers to pour into Southeast Asia, intensifying competition among traditional Japan automakers such as Honda in China and Southeast Asia. Subaru, for example, recently decided to stop car production in Thailand.

In recent years, as China's auto market continues to shift to electrification, local electric vehicle manufacturers such as BYD have risen rapidly, but Japanese automakers, which still focus on gasoline-powered vehicles, are struggling to sell in China. The data also shows that while the sales of China's overall auto market and many local automakers in China are growing, Japanese automakers are still declining and their market share is also decreasing.

For example, Honda's cumulative sales of terminal vehicles in China from January to June this year were 415906 units, a year-on-year decrease of 21.5%. In terms of brands, Dongfeng Honda's annual sales in 2023 will exceed 610,000 units, and its sales have declined for three consecutive years; Guangqi Honda's annual sales in 2023 will exceed 640,000, a year-on-year decrease of about 13.5%.

Nissan's car sales in China have been declining year-on-year for five consecutive years, and the decline is expanding. In 2023, it will be only 793,768 units, a decrease of 16.1% year-on-year. From January to June this year, Nissan's cumulative sales in China were 339,000 units, less than half of last year's total. In June this year, Nissan's sales in China were 52,900 units, a year-on-year decrease of 23.56%;

Data shows that since the 2000s, Japan automakers have continued to expand their presence in China with local partners, driven by the Chinese government. At its peak in 2020, Japan automakers had a 20% market share in China. However, in April this year, the share of Japanese passenger cars in China fell to 15.2%, the lowest since 2013.

In this regard, in addition to Honda's significant reduction of vehicle production capacity in China, Nissan Motor and Toyota Motor are also reducing vehicle production capacity in China.

In November 2023, FAW Toyota said in a letter to dealer partners that FAW Toyota continued to significantly reduce production between December 2023 and February 2024, on top of the significant capacity cuts already made in October and November, in view of the high inventory pressure on dealers.

In March this year, the third production line of FAW Toyota's TEDA plant entered a rare vacation of more than a month. The 21-year-old TEDA plant is the largest production base of Tianjin FAW Toyota, and FAW Toyota's best-selling models such as Vios, Crown, Ruizhi and Corolla have been put into production here. According to the data, in 2022, the vehicle production capacity of the TEDA base will be 620,000 units, accounting for 66% of FAW Toyota's total vehicle production capacity. In 2023, the annual production capacity of the TEDA plant will be about 204,000 units, which is only one-third of that in 2022. This also reflects Toyota's continued reduction of vehicle production capacity in China.

According to a Nikkei newspaper report in March, Nissan Motor will negotiate with a local Chinese joint venture to reduce China's auto production capacity by up to 30%. Then, in late June this year, Nissan Motor announced that it would reduce its production capacity in China by about 10%, and its joint venture passenger car plant in Changzhou City, Jiangsu Province, with an annual production capacity of about 130,000 units, will be closed on the 21st.

In addition, on October 24, 2023, Mitsubishi Motors, another major automobile manufacturer in Japan, also announced that due to the dramatic market changes in China's auto industry, accelerating the shift to electric vehicles at an unexpected speed, and consumers' brand choices have also changed dramatically, it has decided to stop local car production in China and sell its stake in GAC Mitsubishi Motors to GAC Group, completely withdrawing from the Chinese market.

As major Japanese fuel vehicle manufacturers have successively reduced production capacity in China or launched the Chinese market, the supporting Japanese automobile supply chain manufacturers have also been seriously affected.

According to the Nikkei newspaper, Shanghai Hino Engine, a subsidiary of Hino Motors, will be liquidated next year. The subsidiary, which was established in 2003 as a joint venture to supply engines, experienced a decline in sales of commercial vehicle engines due to the increasingly competitive market in China. Japan's auto parts material supplier, Japan Teijin, has also decided to withdraw from its automotive materials business in China; Nippon Steel will also exit its joint venture with Baoshan Steel, cutting its steelmaking capacity in China by about 70%.

Although Japanese automakers are currently declining in the Chinese market, they remain one of the most important markets for Japanese automakers, and Japan automakers are trying to recover by cutting costs and improving their ability to meet the demand for electric vehicles and plug-in hybrids.

Editor: Xinzhixun-Rogue Sword

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