According to Nikkei News, due to declining sales, Honda is reducing its full-time production workforce in China. Approximately 1,700 employees have agreed to resign.
Guangzhou Honda, a joint venture between Honda and China’s GAC Group, has started the process of voluntary resignations among its staff.
The agreement by about 1,700 employees to leave represents 14% of the joint venture’s production workforce.
This move is an example of how Japanese car manufacturers are responding to the fierce price wars in the Chinese market, especially in the electric vehicle sector where traditional advantages like car quality and fuel efficiency are struggling to drive sales.
In April, Honda’s new car sales in China dropped by 22.2% year-on-year, Toyota’s by 27.3%, and Nissan’s by 10.4%.
Honda expects to sell 1.06 million cars in China in the fiscal year 2024, a 13% decrease from the previous year and around 40% lower than the historical peak in the 2020 fiscal year. The company may reduce the number of operational days at its factories in June.
China’s largest electric vehicle maker, BYD, lowered prices for over 10 models in February. Other Chinese car manufacturers followed suit, and even Tesla decided to reduce prices for all four of its electric vehicle models in China.
According to data from the China Association of Automobile Manufacturers, Japanese car brands’ market share in China decreased from 23.1% in 2020 to 12.2% from January 2024 to April 2024. Meanwhile, Chinese brands’ share increased from 38.4% to 60.7%.
Japanese car manufacturers, after increasing production through joint ventures with Chinese companies in the 2000s, are now facing a turning point. The Chinese government’s subsidies have boosted the development of domestic electric vehicles, expanding the market for “new energy vehicles” (including electric cars and plug-in hybrid vehicles). Chinese car manufacturers have utilized the technologies acquired from Japanese manufacturers to develop their own presence, dominating the Chinese market and forcing Japanese car makers into a contraction phase.
Over the past two years, Toyota has laid off contract workers in China, while Honda and Nissan have reduced output at their Chinese factories.
Mitsubishi Motors decided to exit car production in China last year.
Nissan is considering reducing its annual production capacity in China by around 30%. Toyota, in its earnings results briefing this month, stated that its business in China will be a “test of endurance” in the coming years.