A Tough Year for Honda
The year 2024 has not been an easy year for Honda when it comes to its business operations in China. Its revenue occupied the second place, with the unit sales decreasing to 852,269 units, a 30.9% decline. This has been the first time Honda has sold fewer than one million cars in this region in the past nine years. I think it is especially due to the competition from local manufacturers and the reduced demand for ICE (Internal Combustion Engine) vehicles. Looking at the case of Honda, one will find that the company is at the crossroads in an evolving automotive industry.
The Rise of Electric Vehicles
China has become one of the world’s largest markets for EVs, where its market share of new car sales in the past year was 40%. Leading this charge is BYD, as the Chinese carmaker associated 3.83 million of its total passenger car sales with BEVs or PHEVs. This will be four times what it sold in the past year, 2019, and diminish the market share of major brands like Honda severely. There is no doubt that the demand for electrified vehicles is now apparent, meaning that Honda had to rethink its plan in going forward there.
Strategic Production Changes
To adapt to such changes in market conditions, Honda has not remained idle as well. The idea is to reduce production of engines at a factory in Guangdong province by half and is reducing its capacity in this region. The sources, which include Nikkei Asia report, indicate that the production line in the Dongfeng Honda Engine factory is set to shut down by the end of this month. The manufacturing capability reduction at its joint venture operates at annual speeds of 520,000 units to about 260,000 units. Honda halted automotive manufacturing at its joint venture partnership with Guangzhou Automobile Group, which previously manufactured 240,000 vehicles annually.
Honda plans to decrease its local manufacturing quantity below 1.49 million early vehicles in 2024 by dropping to about 960,000 units. The news media has it that Honda is undertaking early retirement packages for those employees that are being laid off due to the shut down of the plants, further demonstrating the company’s wish to manage the change.
Embracing the Future with the S7
Honda has already joined the race towards electric vehicles, which is evident by its new addition to its fleet, the S7. This model belongs to a segment that boasts close competitors in the form of Tesla Model Y, Onvo L60 and Zeekr 7X. The S7 is currently available in two variants with 89.8 kWh battery options and up to 404 miles of range, the base model costs from ¥259,900, equivalent to $36065. It could also be seen as Honda’s strategic shift towards the future mobility in China.
End Note
I believe that the latest developmental direction of electric cars in China is very good for Honda and fittingly timed. Overall performance of the company can be attributed to the company’s ability to respond to some of these factors, as highlighted by the following insight. It is for this reason that as the global automotive industry shifts to the next phase, Honda’s determination in electrification may actually be the key to more growth and product development.
