Agencies
Tokyo
Honda Motor plans to slash production capacity for gasoline-fueled vehicles in China by one-third, equivalent to about 10 percent of its global output, as falling sales of Japanese cars spur changes across the entire Chinese supply chain, Nikkei has learned.
The company will shut three of its seven production lines in the world’s largest auto market, lowering annual capacity for gas cars from 1.49 million vehicles to 1 million.
This will mark Honda’s first cutback in China and the biggest by any Japanese automaker there during thecurrent downturn.
Honda is in talks with joint venture partners GAC Group and Dongfeng Motor Group and is expected to make an official decision as early asthis year.
The move comes amid overcapacity in China’s auto industry as local players have expanded production out of step with demand. This has spurred a flood of low-priced Chinese-made vehicles into Southeast Asia, intensifying price competition in a traditionally strong market for Japanese automakers.
Scaling back production in China would represent a departure from a path of expansion in the country that stretches back to the 1990s. China became Honda’s largest manufacturing hub, beating out the US.
Other Japanese automakers are also restructuring their Chinese operations.
Hino Motors is set to liquidate subsidiary Shanghai Hino Engine next year. The unit, established in 2003 as a joint venture, had seen its sales of engines for commercial vehicles flag amid tougher local competition.
Nissan Motor last month closed a factory for gasoline-fueled vehicles in the eastern province of Jiangsu, cutting its production capacity in China by around 10 percent. With its Chinese plants overall still operating around half capacity, the automaker is considering further closures.
Japanese automakers had expanded their presence in China since the 2000s, working with local partners at the behest of the government, which sought to build up the country’s auto industry. Japanese players held a combined 20 percent share of the market at their 2020 peak, thanks partly to a reputation for quality.
But their strength in internal combustion engine cars has not helped them keep pace with China’s government-led pivot to electric vehicles or compete on price with local rivals. Honda’s sales slumped roughly 40 percent by volume on the year in June.
China remains a crucial auto market. Japanese automakers will try to mount a comeback by cutting costs while improving their ability to meet demand for EVs and plug-in hybrids.
Their struggles are reverberating along the supply chain. Major supplier Nippon Steel is set to withdraw from a joint venture with Baoshan Iron & Steel, slashing its Chinese steelmaking capacity by around 70 percent. Teijin has decided to exit its automotive materials business in the country.
China’s total production capacity for new-energy vehicles -- a category that includes EVs and plug-in hybrids -- is forecast to reach 36 million vehicles next year, local media report, based on plans announced by automakers and local governments. This would amount to extra capacity of nearly 20 million vehicles based on output forecasts.
Excess Chinese cars have been making their way to Southeast Asian and Latin American markets. Subaru recently decided to end auto production in Thailand.