Honda pushes suppliers for 30% cost cuts in $9.4 billion China response
Honda has told suppliers to slash costs by 30% in key parts categories, part of a 1.5 trillion yen savings plan to counter Chinese EV competition.
Honda is pressing its suppliers for deep cost reductions as part of a 1.5 trillion yen ($9.4 billion) savings drive aimed at countering the rise of Chinese electric vehicle makers, according to internal documents and people familiar with the matter.
The automaker, which reported its first annual loss as a publicly traded company in May, has set a target of cutting costs by 30% in three key component categories: pressed and forged parts, electrical components, and parts tied to software-defined vehicles. The targets were communicated to major suppliers at a meeting held this spring in Utsunomiya, near Honda's research and development facility.
Honda managers at that meeting also urged suppliers to source more components from Chinese manufacturers and to standardise parts procured from second- and third-tier suppliers, the documents show. Each supplier was later given company-specific cost-reduction targets.
One person familiar with the discussions described the targets as "extremely large," and it remains unclear whether they can be met. Another source said Honda had not previously signalled a need for aggressive cost cutting, but the current situation left "no room for delay."
A Honda spokesperson declined to comment on specific cost-reduction targets or details of supplier discussions, but said the company was working with suppliers globally to improve competitiveness, including through standardised parts.
The push comes as Japanese automakers lose ground to Chinese rivals such as BYD, which have captured significant market share in Southeast Asia, Latin America, and Europe with low-priced, software-rich EVs. Honda expects its EV-related losses to eventually exceed $12 billion, one of the largest hits among global automakers, and has shifted focus toward gasoline-electric hybrids.
Honda has also faced pressure on other fronts. Last year, it ended merger talks with Nissan that would have created one of the world's largest automakers. On Monday, the two companies announced they would jointly develop standardised electronic control units for software-defined vehicles, with a rollout targeted from the 2029 financial year.
Beyond Chinese competition, automakers are grappling with U.S. import tariffs, higher labour costs, and rising research and development expenses as vehicles become more technologically complex.