Japan’s Honda Motor is targeting more than $9 billion in cost savings by 2030 and has instructed suppliers to significantly reduce prices as competition from Chinese automakers intensifies.
According to internal company documents reviewed by Reuters and a person familiar with the matter, Honda aims to save 1.5 trillion yen ($9.4 billion) over the next four years.
The cost-cutting drive is among the clearest indications yet of the pressure facing Japanese automakers as Chinese electric vehicle manufacturers, led by BYD, expand rapidly across Southeast Asia, Latin America and Europe.
Chinese EV makers are gaining market share through lower prices, advanced software and battery technology, increasing pressure on established manufacturers to reduce production costs while investing heavily in new technologies.
Honda, the world’s largest motorcycle manufacturer, is also seeking to revive its struggling car business after scaling back its electric vehicle ambitions.
The company expects losses related to its EV operations to eventually exceed $12 billion, one of the largest such setbacks among global automakers. It is now placing greater emphasis on gasoline-electric hybrid vehicles.
In May, Honda reported its first annual loss since becoming a publicly traded company.
Honda managers met major suppliers at a convention centre in Utsunomiya, north of Tokyo, during the spring to outline the new cost-reduction strategy, according to the documents and two people familiar with the matter.
The suppliers were subsequently given individual cost-cutting targets.
Honda is seeking a 30 per cent reduction in costs across three major parts categories — pressed and forged components, electrical parts, and components used in software-defined vehicles.
The company believes the reductions would help Japanese suppliers compete more effectively with lower-cost Chinese rivals.
Honda also asked its tier-one suppliers to review their procurement practices and increase their use of standardised components sourced from second- and third-tier suppliers.
Suppliers were further encouraged to expand their use of Chinese-made components where possible.
One person familiar with the discussions described the targets as “extremely large” and questioned whether they could be achieved.
Another source said Honda had not previously appeared to be pursuing such aggressive cost reductions, but that the situation now appeared to leave “no room for delay.”
Honda said it was working with suppliers globally to improve competitiveness and lower costs, including through greater use of standardised parts.
A company spokesperson, however, declined to comment on specific cost-reduction targets or details of its discussions with suppliers.
The latest strategy comes as Honda faces mounting pressure from Chinese competition, US import tariffs and rising labour costs.
The company is also required to increase spending on research and development as vehicles become increasingly sophisticated, particularly in areas such as software, batteries and electronic systems.
On Monday, Honda and Nissan announced plans to jointly develop standardised electronic control units for software-defined vehicles, with the companies targeting deployment of an architecture based on the technology from the 2029 financial year.
Honda Chief Executive Toshihiro Mibe has also faced pressure over the company’s performance, although shareholders backed his reappointment to the board in June.
Last year, Honda and Nissan abandoned merger talks that could have created one of the world’s largest automakers.
The renewed focus on cost reduction reflects the broader struggle among Japanese carmakers to defend their global position as Chinese manufacturers expand beyond their home market and compete increasingly on both price and technology.
Boluwatife Enome
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