Honda to Close and Halt Production at China Plants

Japan’s Honda Motor announced on Thursday its decision to close one factory and halt vehicle production at another in China as it shifts focus towards electric vehicles (EVs) amid growing competition from local Chinese brands.

The closure will involve a plant operated through Honda’s joint venture (JV) with Guangzhou Automobile Group, a state-owned automaker, which is set to cease operations in October. This factory, opened nearly two decades ago, primarily produced the Accord sedan and had an annual production capacity of 50,000 vehicles.

Impact on Production Capacity:

In addition to the closure, Honda will suspend production at another factory in China, operated through a separate JV with Dongfeng Motor, starting in November.

This facility has an annual production capacity of 240,000 vehicles. As a result of these changes, Honda’s total annual production capacity in China will decrease from 1.49 million vehicles to 1.2 million.

Strategic Shift and New EV Plants:

Reducing production capacity is part of Honda’s strategy to optimize its output in China, which faces stiff competition in the world’s largest auto market.

However, Honda plans to boost its capacity to 1.44 million vehicles by initiating production at two new EV plants built through its JVs with GAC and Dongfeng. The company expects these plants to start operations later this year.

Challenges from Domestic Automakers:

Chinese automakers have increasingly captured market share with affordable, feature-rich vehicles, creating challenges for traditional foreign brands like Honda and Nissan Motor.

The rise of domestic players has particularly affected Honda, which previously enjoyed a strong market presence in China.

Collaborative Efforts and Future Plans:

In response to the changing market dynamics, Honda and Nissan announced in March that they are considering a strategic partnership to collaborate on EV components and artificial intelligence in automotive software platforms. This partnership aims to enhance their competitiveness in the evolving automotive landscape.

The Nikkei Business Daily first reported Honda’s plans to reduce its annual production capacity in China earlier on Thursday, highlighting its strategic shift and the broader market challenges Japanese automakers face.