Tokyo: Japan’s Honda is planning to cut more than $9 billion in costs over the next four years as it faces growing competition from Chinese carmakers, particularly in the electric vehicle (EV) market.
According to internal documents reviewed by Reuters and people familiar with the matter, Honda aims to save around 1.5 trillion yen ($9.4 billion) by 2030. The company has also asked suppliers to make significant reductions in their prices.
Honda asks suppliers to cut costs
Honda managers met major suppliers at a meeting in Utsunomiya earlier this year and outlined the company’s cost-cutting plans, according to the documents.
Suppliers were reportedly given individual targets, with Honda seeking cost reductions of around 30 per cent in three major areas — pressed and forged components, electrical parts and components used in software-defined vehicles.
The company also encouraged suppliers to review their procurement methods and increase the use of standardised parts from lower-tier suppliers.
Honda is also considering sourcing more components from Chinese suppliers, the report said.
Chinese EV makers put pressure on Honda
The cost-cutting push comes as Chinese companies such as BYD continue to expand their presence in international markets.
Chinese EV makers have gained market share in Southeast Asia, Latin America and Europe, helped by competitive prices, battery technology and advanced vehicle software.
Honda, meanwhile, has faced difficulties with its car business. The company expects losses linked to EVs to exceed $12 billion and has shifted greater attention towards gasoline-electric hybrid vehicles.
In May, Honda reported its first annual loss as a publicly traded company.
Automakers face rising costs
Honda is also dealing with higher labour expenses, US import tariffs and increasing investment requirements as vehicles become more technologically advanced.
The company is working with Nissan on standardised electronic control units for software-defined vehicles, with a new architecture targeted from the 2029 financial year.
Honda CEO Toshihiro Mibe has also faced pressure over the company’s performance, although shareholders backed his reappointment to the board in June.
The latest cost-cutting drive highlights the growing pressure on Japanese automakers to reduce prices and improve efficiency as Chinese manufacturers become increasingly competitive worldwide.