Honda Knows China's Car Companies Are A Massive Problem

We've all been hearing for years how the Chinese automobile manufacturers operate at what is effectively light speed compared to other brands around the world, and it turns out that Honda recently did a site tour and saw just how much trouble they're in for themselves.

There have been a lot of headwinds against Honda's electric vehicle program over the last few years, culminating in the cancellation of plans for three US-built EVs. While it's difficult to watch three fully electric SUVs never see the light of day, it's nothing compared to what Honda is feeling in its $15.7 billion loss on the ordeal and the associated writedown of its electric vehicle business. Worse yet, the Honda-Sony Afeela EVs are also dead.

Some of this is a result of the market shifting in China, with Honda's sales in the country dropping from 1.62 million in 2020 to roughly 640,000 units in 2025. They expect output of their manufacturing facilities within the country to only be around 600,000 units in 2026, representing only 50% of what they can pump out.

For reference, auto suppliers and manufacturing plants try to operate around 75% of their capacity, the point at which the operation is usually profitable. Needless to say, Honda's taking a financial bath on what's happening with their Chinese production and sales.

Given the state of affairs, Honda's CEO and President Toshihiro Mibe recently took a trip to China and, after visiting a supplier factory in Shanghai, said "We have no chance against this" and "We must act quickly," according to outlet Nikkei Asia. Sounds like confidence is low for Honda's ability to keep up with the rate at which the Chinese manufacturers can turn around a vehicle from concept to production, a timeframe which is reportedly an astonishingly fast two years.

The visit at least gave Mibe motivation to make some changes within Honda, with the company now moving its independent Research and Development to a new facility within its engineering subsidiary. This will allow the engineers to work more quickly and with less reliance on the other branches of the company, in turn creating more efficiency in the process that ultimately allows for a car to be designed faster on the mechanical front.

AutoGuide's Take:

Perhaps this realization and reactionary action from Honda will help further its electric vehicle portfolio within the Chinese market, which currently consists of three vehicles. As a reminder, we only have one fully electric Honda vehicle in the States, and the Prologue is really a General Motors product underneath, with the American company responsible for the development and production of the vehicle.

Truth be told, EVs only made up 2.5% of Honda's 2025 automotive sales, meaning they only moved 84,000 battery-powered cars. The coming years may be the telling moments for Honda's electric business. There's always some fluctuation in the automotive business—even China's own BYD saw sales decline last year. Other market factors are certainly at play in the global shape of the EV business, and though Honda is only a small part of it, they still want to operate a business that brings home maximum profits.

There's a lot to digest here, especially given how the state of China's full-throttle push for electrification contradicts the current American government's seemingly endless ability to strip away regulations and tax credits that would spur increased EV sales domestically.

Frankly, the US is only a small piece of the electric vehicle market; it really is countries like China that drive the industry, and if Honda wants to keep up, they will have to get their act together in a way the brand has never had to in the past.

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