Honda Motor Co., Ltd. Sponsored ADR (HMC.US) plans to cut costs by over $9 billion and has called on suppliers to lower prices and expand procurement of components from China.

According to reports, Honda Motor Co., Ltd. Sponsored ADR (HMC.US) plans to cut costs by over $9 billion in the next four years and has requested suppliers to significantly lower prices while increasing the use of Chinese-made parts as much as possible. According to related documents and sources familiar with the matter, Honda aims to achieve a 30% cost reduction in three key component categories, including stamped and forged parts, electrical components, and parts related to software-defined vehicles (SDVs). The documents indicate that this move will help Japanese suppliers better compete with Chinese rivals. The automaker now plans to save 1.5 trillion yen (approximately $9.4 billion) by 2030. The documents also show that Honda's direct suppliers (i.e., "first-tier suppliers") have been asked to reassess their material procurement methods and are encouraged to use standardized parts from second- and third-tier suppliers to help lower costs. According to the documents, Honda's management has also asked suppliers to increase the use of Chinese-made parts as much as possible. Reports state that this cost-cutting target is "extremely ambitious," and it remains unclear whether these goals can be achieved. Japanese automakers are facing strong competition from Chinese rivals. With advanced software and battery technologies as well as cost-effective advantages, Chinese electric vehicle brands have been making significant inroads into markets in Southeast Asia, Latin America, and Europe, capturing substantial market shares. A spokesperson for Honda stated that the company is working with global suppliers to enhance competitiveness and reduce costs through various means, including the adoption of standardized parts. On Wednesday, pre-market trading saw Honda Motor Co., Ltd. Sponsored ADR drop by 0.7%. The stock has risen nearly 12% year to date.