In reaction to the increasing local competition and the dwindling demand for ICE vehicles, Honda Motor Company has announced a plan to slash its engine production capacity in China due to persistent overcapacity issues. The move, after all, dovetails with a broader plan of the company to turn towards battery electric vehicles amid changing market dynamics.
A Japanese automaker confirmed that it would close one of the two lines for engine production at the Dongfeng Honda Engine Company Joint Venture located in Guangzhou, South China. The move will see the plant’s overall engine production capability halved by the end of March, dropping from 520,000 to 260,000 units annually.
Such a course of action is considered a welcome major stride towards Honda’s intention of facilitating the transition away from gasoline-powered vehicles towards electric modes for both the domestic market and exports.
The production-capacity reduction means about 30% of Honda’s ICE vehicle sales in China, according to a company official. During the year, the vehicle sales dipped by 31% to 852,000 units, a decade low for the company, amid rising competition from Chinese electric vehicle makers and a general shift among consumers to electric cars.
Honda is restructuring in China after it shut or suspended operations at three plants in Guangzhou and Wuhan during the past 12 months. Following its establishing in 1948, Honda became one of the biggest automobile and motorcycle makers in the world. Honda is well-known for its innovations, spreading across fuel-efficient to electric vehicle technologies.