On May 15th, it was reported that due to sluggish sales in China, GAC Honda began recruiting voluntary resignations from its production staff this month. Currently, about 1700 people have applied, accounting for 14% of the total number of joint venture employees.
In order to ensure the sustainable operation of the company and accelerate strategic transformation, GAC Honda will further improve personnel efficiency. In response to this, GAC Honda responded to 21st Century Business Herald reporters that measures include some employees in the production sector not renewing their first labor contracts upon expiration, voluntarily negotiating the termination of their labor contracts, and so on. If employees voluntarily negotiate to terminate their labor contracts, GAC Honda will provide economic compensation in accordance with the law, regulations, and in a timely manner. The specific number of employees will be determined based on the negotiation situation.
21st Century Business Herald reporters learned from insiders that the layoffs did not specifically target a particular production line. "Due to a decrease in production, employees have been diverted several times, but the production line merged with Honda China will be shut down.".
In addition, GAC Honda will provide a compensation plan of "N+2+1.8" for departing employees. "N+2 is standard compensation, and 1.8 months may be a bonus."
The aforementioned insider told reporters that this time there is no involvement of management positions. "However, expectations are also approaching, and it is estimated that it will be the management position next year."
It is worth noting that last year, Guangzhou Honda was exposed to have laid off employees for the first time in its 25 year history. On December 2nd last year, Honda announced that due to its rapid shift towards the electric vehicle market, it had decided to reduce approximately 900 contract workers from its Chinese joint venture, GAC Honda, which accounted for 7% of GAC Honda's approximately 13000 employees at the time.
At that time, a person related to GAC Honda stated, "This is a phased adjustment in production, involving labor dispatch personnel. We have terminated the personnel dispatch agreement with the labor company. GAC Honda will provide economic compensation in accordance with the law, regulations, and in a timely manner." The person stated that this adjustment will not have an impact on GAC Honda's subsequent electrification and intelligence strategies.
Previously, Japanese cars had a significant market share in the domestic market due to their high resale value, high fuel economy, and low maintenance costs. However, in the increasingly fierce competition in the new energy vehicle market, the rapid rise of independent brands has posed greater challenges to traditional joint venture brands that have dominated the Chinese market over the past few decades and heavily rely on fuel vehicles, especially Japanese car companies that have shown a slight delay in electrification.
In terms of sales, after reaching a peak of 1.627 million units in 2020, Honda has been declining in the Chinese market for three consecutive years. From 2021 to 2023, its sales were 1.5615 million units, 1.3731 million units, and 1.2342 million units, respectively, a year-on-year decline of 4.0%, 12.07%, and 10.12%.
The first four months of this year did not recover. The latest data shows that Honda's cumulative sales of terminal cars in China in April were 73800 units. From January to April this year, Honda's cumulative sales of terminal cars in China were 28700 units, a year-on-year decrease of 10.9%; Among them, Guangzhou Honda's cumulative sales were 141800 units, a year-on-year decrease of 19.01%.
Due to the continuous decline in sales, Honda plans to reduce its sales plan in China this year by 13% to 1.06 million vehicles.
In the past period of time, the retail market share of Japanese joint venture brands in China has fluctuated, with a low point of only about 16%. In April, mainstream joint venture brands retailed 450000 vehicles, a year-on-year decrease of 26% and a month on month decrease of 9%. Among them, the retail share of Japanese brands was 15.2%, a year-on-year decrease of 3.6 percentage points.
Industry insiders believe that the lagging deployment of electrified products and weak product lines are important reasons for the decline in sales of Japanese car companies in China.
Industry insiders have pointed out that the large-scale rise of pure electric vehicles in China has a comprehensive impact on traditional cars, involving production modes, market competition, supply chain, employment, and energy structure. "Although Japanese cars have certain technological advantages in the field of new energy vehicles, their new energy vehicle strategy in the Chinese market seems to have not been fully implemented, which to some extent affects their market position. Faced with increasingly fierce competition from local manufacturers such as BYD, how Japanese car companies can stabilize and expand their market position is a test of their intelligence and strength."
"The joint venture has indeed been late in its new energy layout and has not caught up with the changes in the Chinese automotive market." A senior executive of a joint venture car company told 21st Century Business Herald reporters that in the past three years, cars produced by local ethnic brands in China have not only met national policy requirements but also consumer needs. Conversely, new energy vehicles produced by joint venture brands have not kept up with legal regulations. "Although we adapt to the new energy transformation through hybrid power, we cannot go green and do not meet the basic needs of Chinese young consumers' internet connectivity. We still excessively pursue traditional safety and so on."
"We recognize that Honda's layout in the new energy product lineup is relatively slow compared to the market," said Yasuhisa Kobayashi, Executive Director of Honda Technology Research Industries Co., Ltd. and Head of the China headquarters, General Manager of Honda Technology Research Industries (China) Investment Co., Ltd., and General Manager of Honda Technology Research Technology (China) Co., Ltd., in an interview with 21st Century Business Herald reporters.
In response to the rapidly changing Chinese automotive market, Honda has launched a new electric brand "Ye" this year, following the release of the pure electric vehicle brand "e: N" in the Chinese market in 2021. Two models, "Ye S7" and "Ye P7", will be launched by the end of 2024. At the recently held Beijing Auto Show, the second bullet model of Honda's pure electric vehicle brand e: N, the e: NP2 (Jipai 2) under GAC Honda, was officially launched. Dongfeng Honda's Lieguang e: NS2 announced its pre-sale price and plans to be launched in June.
"In response to the current shrinking market share of China's fuel vehicles and the expansion of the market share of new energy vehicles, Honda will quickly take measures to cope with environmental changes." Fifty Lan Yaxing told 21st Century Economic News reporters that Honda is currently facing two urgent problems: first, it must quickly respond to the current situation of expanding market share of new energy vehicles; Secondly, in response to the expanding decline in sales of gasoline vehicles, Honda needs to consider whether to make adjustments in terms of productivity.
Honda's recent financial report shows that in the 2024 fiscal year, it will invest 1.19 trillion yen in research and development expenses, exceeding 1 trillion yen for the first time. Most of the expenses will be used for the research and investment of pure electric vehicles. Honda Technology Research Industry Co., Ltd., represented by the chairman of the ban, Toshihiro Mibu, emphasized that "electrification and software require large-scale development investment.".
The global wave of intelligence is refreshing the perception of foreign consumers, and Japanese automotive brands are focusing on cooperating with Chinese technology companies in the field of intelligence.
Nissan and Baidu have signed a memorandum of understanding, and both parties will conduct feasibility studies on strategic cooperation in the fields of artificial intelligence and intelligent vehicles; Toyota announced its collaboration with Tencent and is expected to release a jointly developed new product by the end of this year.
Honda executives stated in an interview with 21st Century Business Herald that many Chinese companies are at the forefront in areas such as intelligence and autonomous driving. Honda will actively cooperate with excellent professional manufacturers in China in the field of advanced technology with an open attitude.