Honda Reduces Gas Engine Production in China Following Sales Decline to Prioritize Electric Vehicles | Carscoops

      Emerging local brands such as BYD have compelled Honda to make significant changes in the highly competitive new car market, particularly in China.

      The Japanese automaker is shutting down one of the manufacturing lines at the Dongfeng Honda Engine factory. Earlier in January, Honda ceased production at one of its joint venture plants with the GAC Group.

      A key new vehicle for Honda in China is the all-electric S7, which competes directly with the Tesla Model Y.

      Honda faced challenges in China during the past year, with sales plummeting by 30.9% to 852,269 units in 2024. This marks the first instance in nine years where the company sold fewer than 1 million cars in the region. Part of the decline is attributed to heightened competition from local firms and a waning demand for traditional internal combustion engine vehicles. In response, Honda intends to reduce production at an engine facility in Guangdong province by 50% and intensify its focus on electric vehicles.

      Last year, electric vehicles, including BEVs, PHEVs, and FCEVs, represented approximately 40% of all new car sales in China, with BYD at the forefront. In 2024, BYD achieved sales of 3.83 million passenger cars, all classified as BEVs or PHEVs. This figure is 8.5 times higher than their local sales in 2019, and their swift expansion has come at the expense of market share from established brands like Honda.

      Reportedly, due to the robust demand for electric vehicles, Honda will terminate a manufacturing line at the Dongfeng Honda Engine factory by the end of this month, according to Nikkei Asia. This decision will cut the annual production capability of its joint venture from 520,000 to around 260,000 units.

      Earlier in January, Honda also stopped production at a joint venture facility with Guangzhou Automobile Group, which had an annual output capacity of 240,000 vehicles. These changes will reduce Honda’s overall manufacturing capacity in China from 1.49 million units at the beginning of 2024 to just 960,000. Local media reports suggest that the company is offering early retirement packages to workers affected by the plant closures.

      Among its crucial new models in China is the all-electric S7. This compact SUV is a direct rival to the Tesla Model Y, Onvo L60, and Zeekr 7X. It is available in two versions, both equipped with 89.8 kWh battery packs and offering up to 404 miles of range. Local starting prices are approximately ¥259,900, just under $36,000. Honda is also developing two additional EVs – a larger crossover named the P7 and an elegant sedan that was previewed last year with the GT Concept.