Honda Motor in China is undergoing large-scale layoffs, with three factories temporarily suspending operations to accelerate electrification transformation

According to the financial news app Zhitong Finance, Honda Motor Co., Ltd. (HMC.US) is undergoing a series of strategic adjustments in China to cope with market changes and accelerate its electrification transformation. As part of this transformation plan, the company has decided to reduce its workforce in China and suspend production activities at its three factories in China to reduce inventory and optimize production capacity.

It is reported that Honda Motor's joint venture with China's state-owned Dongfeng Motor Corporation, Dongfeng Honda, has proposed a layoff plan to more than 2,000 employees. Dongfeng Honda stated that this personnel optimization measure is to ensure the company's sustainable operation and accelerate the strategic pace towards electric vehicles.

Honda Motor revealed that to reduce inventory, production at the three factories has been suspended for about two weeks since August 26. Although Honda has not commented on the layoffs, this move is clearly in response to market demand changes and the company's strategic adjustments.

It is worth noting that Honda Motor announced two months ago that it would cut gasoline car production in China by 19% starting from October to support its electrification process. Starting from November, a production line with an annual capacity of 240,000 vehicles at Dongfeng Honda will be closed, and the GAC Honda factory with an annual capacity of 50,000 vehicles will also be fully closed in October.

A Honda spokesperson stated via email that these measures are to "accelerate the steady transition to electric vehicles, optimize production capacity, and achieve sustainable growth in our four-wheeler business in China."

It is understood that the automotive industry is rapidly transitioning to electric vehicles, and this trend, along with the fierce competition in the Chinese market, has affected the sales and profits of foreign car manufacturers including Japan, the United States, and Germany. In the first half of 2024, Honda's sales in China decreased by 21.48%.

To adapt to this change, Honda has not only reduced gasoline car production but also established another joint venture with GAC Group, which also laid off employees earlier this year. With the continuous decline in demand for internal combustion engine vehicles in China and the continuous growth in demand for electric and hybrid vehicles, Honda's strategic adjustments are particularly important.

According to data from the China Passenger Car Association, sales of traditional gasoline cars have decreased by 15% in the first eight months of this year. Honda's series of measures are undoubtedly aimed at maintaining a leading position in the competitive market and ensuring its long-term sustainable development