The Zhitong Finance App learned that Honda Motor (HMC.US) is making a series of strategic adjustments in China to cope with market changes and accelerate its electrification transformation. As part of this transformation plan, the company has decided to cut jobs in China and suspend production activities at its three Chinese plants to reduce inventory and optimize production capacity.

According to reports, Dongfeng Honda, a joint venture between Honda Motor and China's state-owned Dongfeng Motor Group Co., Ltd., has proposed a layoff plan for more than 2,000 employees. Dongfeng Honda issued a statement saying that this personnel optimization measure is to ensure the company's sustainable operation and accelerate the strategic pace of transformation to electric vehicles.

Honda revealed that in order to reduce inventory, the three factories have suspended production for about two weeks since August 26. Although Honda did not comment on the layoffs, the move was clearly in response to changing market demand and the company's strategic adjustments.

Notably, Honda Motor announced two months ago that it will cut production of gasoline vehicles manufactured in China by 19% starting in October to support its electrification process. Starting in November, Dongfeng Honda's production line with an annual production capacity of 0.24 million vehicles will be shut down, while the Guangqi Honda plant, with an annual production capacity of 0.05 million vehicles, will also completely shut down in October.

A Honda spokesperson said via email that the measures were to “accelerate the steady shift to electric vehicles and optimize production capacity to achieve sustainable growth in our four-wheeler business in China.”

According to information, the automobile industry is rapidly transforming to electric vehicles. This trend and intense competition in the Chinese market have had an impact on the sales volume and earnings of foreign automobile manufacturers, including Japan, the United States, and Germany. In the first half of 2024, Honda's sales volume in China fell by 21.48%.

In order to adapt to this change, Honda not only reduced the production of gasoline vehicles, but also established another joint venture with the GAC Group, which also laid off employees earlier this year. As demand for internal combustion engine vehicles in China continues to decline and demand for electric vehicles and hybrid vehicles continues to grow, Honda's strategic adjustment is particularly important.

According to data from the China Passenger Vehicle Association, sales of traditional gasoline vehicles fell 15% in the first eight months of this year. Honda's series of measures is undoubtedly aimed at maintaining a leading position in a competitive market and ensuring its long-term sustainable development.