Honda asks suppliers to cut costs in $9 billion China defense push

• Honda aims to cut 1.5 trillion yen ($9.4 billion) by 2030, with 30% cost reductions targeted in three key parts categories: pressed and forged components, electrical parts, and software-defined vehicle components
• The company is instructing suppliers to source more components from Chinese manufacturers and use standardized parts from lower-tier suppliers to compete with Chinese rivals
• Honda expects EV-related losses to exceed $12 billion and is shifting focus to gasoline-electric hybrids after its struggling electric vehicle strategy

Honda Targets $9 Billion Cost Cuts Amid China EV Competition

Honda is pursuing aggressive cost reductions of 1.5 trillion yen ($9.4 billion) by 2030 as it struggles to compete with Chinese electric vehicle manufacturers, according to internal documents and sources reviewed by Reuters.

Key Actions:

• Honda met with major suppliers in spring 2024 at Utsunomiya, requesting 30% cost reductions across three categories: pressed/forged components, electrical parts, and software-defined vehicle (SDV) parts
• The company is instructing suppliers to source more components from Chinese manufacturers
• Tier-one suppliers were urged to use standardized parts from lower-tier suppliers to reduce costs

Financial Context:

• Honda expects EV-related losses to exceed $12 billion, among the highest globally
• The company reported its first-ever annual loss as a publicly traded entity in May
• Honda is shifting strategy from EVs to gasoline-electric hybrids

Market Pressures:

• Chinese EV makers like BYD are capturing significant market share
• Additional challenges include Trump administration import tariffs, rising labor costs, and increased R&D requirements
• Honda CEO Toshihiro Mibe faces criticism from former executives over company performance

Strategic Developments:

• Honda and Nissan announced Monday they will collaborate on standardized electronic control units for SDVs, launching in fiscal 2029
• This follows failed merger talks between the two Japanese automakers in 2024

Sources indicate the cost-reduction targets are "extremely large" with uncertain achievability, reflecting the urgency of Honda's competitive position against Chinese manufacturers.