Nissan and Honda look to cut production capacities in China

Nissan and Honda are preparing to significantly reduce their production capacities in China. The background to this is allegedly that the Japanese car manufacturers are finding it difficult to keep up with Chinese competitors in the race for electric cars.

As reported by Nikkei Asia, Nissan and Honda are planning to reduce production capacities by up to 30 per cent (Nissan) and 20 per cent (Honda) in their respective Chinese joint ventures. However, there is no mention of a change in the majority structure of the respective joint ventures. It is only about production capacities, not about a (partial) sale of shares.

Nissan currently holds a 50:50 joint venture called Dongfeng Motor Company Limited together with the Dongfeng Motor Group – to avoid any confusion with the Chinese manufacturer, the joint venture itself is softly referred to as Dongfeng-Nissan. Through the joint venture, the Japanese can currently build around 1.6 million cars per year in China. If this capacity were to be reduced by 30 per cent, this would equate to around 500,000 fewer cars.

However, Nissan has not even utilised this capacity recently. In 2023, only 793,000 vehicles were built in China, a decrease of 24 per cent compared to 2022 – previously, Dongfeng-Nissan had consistently produced over one million units for more than a decade. Specifically, a total of eight factories are to be restructured and some plants, which have so far served the meagre domestic demand, are to produce for export in future. At least this is how sources from the Japanese business newspaper Nikkei describe the plans, which have not yet been officially confirmed.

Honda also chose Dongfeng as a joint venture partner in 2003; the joint venture founded in 2003 is called Dongfeng Honda Automobile Company. There is also a joint venture with the GAC Group called GAC Honda Automobile. Honda currently has a production capacity of 1.49 million vehicles per year in its Chinese factories. This figure is to be reduced to 1.2 million units in the future. According to Nikkei, Honda is in talks with local partners and has already informed the most important suppliers that production will be reduced.

Japanese manufacturers first became active in China in the 2000s through joint ventures and have celebrated some successes there. However, the focus of Chinese industry and consumers has recently shifted from joint venture brands to local Chinese brands. In 2023, Chinese markets had a market share of 56 per cent. And when it comes to new energy vehicles, Chinese brands are also leading the way and not the joint ventures. As a result, not only the Japanese companies, but also the South Korean and German brands have recently come under pressure in China. The market leader is no longer Volkswagen, but BYD.

nikkei.com