Two Honda affiliated car companies in China have announced employee layoffs totaling 5,000 in less than a year. Dongfeng Honda recently cut nearly 2,000 jobs, with potential further reductions on the horizon; Guangqi Honda has laid off around 3,000 employees since the end of 2023.
According to a report by “Jiemian News” on September 10th, an internal source who had worked at Dongfeng Honda for two years confirmed that the company offered nearly 2,000 voluntary resignation options with severance pay of up to “N+3.” The laid-off employees are mainly from the production line. This is the first time the employee experienced such extensive layoffs since joining Dongfeng Honda.
On the same day, Dongfeng Honda responded that the optimization was aimed at improving operational efficiency and accelerating strategic transformation. The optimization will primarily focus on the production area and will be implemented through voluntary resignations, providing employees with proper and reasonable compensation packages.
Dongfeng Honda is implementing a severance package known as “N+2+1,” where “N” represents years of service, “2” signifies two months’ salary, and “1” indicates an additional month’s bonus. Dongfeng Honda stated that many departing employees are satisfied with the compensation plan.
Honda plans to reduce approximately 3,000 positions in its Chinese operations through layoffs and natural attrition at Guangqi Honda by the end of the 2024 fiscal year (ending in March 2025). The personnel reduction at Dongfeng Honda is not included in this number, and the scale of layoffs there might expand.
Prior to Dongfeng Honda’s layoffs, Guangqi Honda had already cut 900 jobs at the end of last year, marking its first layoffs in 25 years. In May of this year, Guangqi Honda further reduced its workforce by over 2,000 employees.
Due to sluggish performance in the Chinese market, Honda plans to reduce its gasoline car production capacity by 30% through measures such as factory closures, reducing annual production capacity from 1.49 million to 1 million vehicles, the largest reduction among Japanese automakers. On July 26th, Dongfeng Honda announced the temporary suspension of production at its Wuhan second factory line starting in November this year.
The latest data shows that in August of this year, Dongfeng Honda sold 23,803 vehicles, a 59.7% decrease compared to the previous year; with a year-to-date sales volume of 275,915 vehicles, down by 19.05%. Overall Honda sales in China from January to August this year totaled 525,400 vehicles, a 27.2% decrease from the same period last year.
In contrast to the sharp decline in sales in the Chinese market, Honda’s consolidated operating profit for April to June hit a historical high. In the U.S. market, benefiting from a sharp increase in sales of hybrid models, Honda’s total sales from April to June grew by 3% year-on-year, marking 16 consecutive months of growth in monthly sales.
Facing cutthroat competition and policy subsidies from the Chinese authorities, foreign carmakers are grappling with tough challenges in the Chinese market. According to data from the China Passenger Car Market Information Joint Council, in July, the market share of foreign automakers in China dropped from 53% two years ago to 33%.