Honda Motor Co., Ltd. Sponsored ADR (HMC.US) is undergoing large-scale layoffs in China, with three factories temporarily ceasing operations in order to accelerate electrification transformation.

Honda Motor Co., Ltd. Sponsored ADR (HMC.US) is undergoing a series of strategic adjustments in China to respond to market changes and accelerate its electrification transformation. As part of this transformation plan, the company has decided to reduce job positions in China and suspend production activities at its three factories in China to reduce inventory and optimize production capacity. Reportedly, Honda Motor Co., Ltd. Sponsored ADR's joint venture with China's state-owned Dongfeng Motor Corporation, Dongfeng Honda, has proposed layoffs to over 2,000 employees. Dongfeng Honda stated that this employee optimization measure is to ensure the company's sustainable operation and accelerate its strategic pace towards electric vehicles. Honda Motor Co., Ltd. Sponsored ADR revealed that to reduce inventory, production at the three factories has been suspended for about two weeks starting from August 26. While Honda did not comment 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 Co., Ltd. Sponsored ADR announced two months ago that it would reduce gasoline car production in China by 19% starting in October to support its electrification process. Starting in November, Dongfeng Honda's production line with an annual capacity of 240,000 vehicles will be closed, and Guangzhou Honda's factory with an annual capacity of 50,000 vehicles will also be completely shut down in October. A Honda spokesperson stated via email that these measures are to "accelerate the steady transition to electric vehicles and optimize production capacity to achieve sustainable growth in our four-wheeler business in China." The automotive industry is rapidly transitioning to electric vehicles, and this trend, along with fierce competition in the Chinese market, has impacted sales and profits of foreign car manufacturers including from Japan, the United States, and Germany. Honda's sales in China dropped by 21.48% in the first half of 2024. To adapt to this change, Honda has not only reduced gasoline car production but also established another joint venture with Guangzhou Automobile Group, which also laid off employees earlier this year. With the continuous decline in demand for internal combustion engine vehicles in China and the 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 dropped by 15% in the first eight months of this year. Honda's series of measures undoubtedly aim to maintain a leading position in the competitive market and ensure its long-term sustainable development.