Honda has announced plans to cut down its production of gasoline-powered vehicles in China and strategically shift towards its electric vehicle (EV) plans in the Chinese market.

In detail, Honda will cut its gasoline-powered vehicle output by 19% starting from October 2024, with the potential for further reductions in the future. This strategic move arrives after facing increasing challenges in the Chinese market due to lackluster EV offerings and intense competition.

As part of this restructuring, Honda will halt operations at one production line of its Dongfeng Honda joint venture, which has an annual capacity of 240,000 units, beginning in November.

In addition, the company will completely shut down its GAC Honda plant, capable of producing 50,000 units annually, in October. These plants will be repurposed for EV-related activities, with Dongfeng Honda transitioning to auto parts production and research, while GAC Honda will be converted into a warehouse according to Bloomberg. 

A Honda spokesperson stated through email that this move aims to “accelerate the steady shift to EVs and optimize production capacity for sustainable growth of our four-wheel business in China.” As of now, the company’s total production capacity in China, currently around 1.5 million units, will decrease by 19% following these changes.

Notably, Honda is not alone in this as Nissan has also begun restructuring their Chinese operations by recently shutting down a gasoline vehicle plant in Jiangsu province, cutting down its production capacity in China by around 10%.

The challenges faced by Japanese automakers in China are having ripple effects throughout the supply chain. Nippon Steel Corp. recently announced its exit from a joint venture in China due to declining sales among its major Japanese automotive clients.

With China’s aggressive push towards electrification supported by government policies and changing buyer preferences, the Chinese domestic brands as well as Tesla have capitalized on this direction as reports indicate the country’s total production capacity for new-energy vehicles (NEVs) including EVs could reach 36 million units by next year. 

Read More: CSIS Study Finds China’s EV Industry Boosted With $230 Billion In Support

China still remains critical for Honda’s EV strategy now focusing on reducing costs while improving its ability to meet the growing demand for EVs will see the adaptation to a rapidly changing market. With this in mind, the success of this strategic shift will determine Honda’s future position in the world’s largest automotive market.

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