Honda targets billions in savings as Chinese automakers pressure its business

Tokyo, Japan — Honda Motor Co. is seeking deep cost reductions across its supply chain as it tries to restore profitability and close a competitive gap with faster-moving Chinese automakers.

The Japanese automaker is targeting 1.5 trillion yen ($9.4 billion) in savings by 2030 and has asked suppliers to sharply reduce costs, according to internal documents reviewed by Reuters and people familiar with the matter. The effort includes targeted reductions in several categories of vehicle components.

Honda has not publicly disclosed the 1.5 trillion-yen target. The company said it is working to improve its cost structure and development efficiency as part of a broader effort to rebuild its automobile business.

The push comes as Honda scales back its earlier ambitions for electric vehicles and puts greater emphasis on hybrids. In March, the company canceled plans to develop and launch three electric models in North America, citing slower EV-market growth and a changing business environment.

Honda said its automobile business has also lost competitiveness in China, where newer automakers have moved quickly into software-defined vehicles and other technology-driven features. The company acknowledged that it had been unable to offer products with better value than those from emerging competitors.

Honda expects the reassessment of its electrification strategy to result in as much as 2.5 trillion yen in total losses across the fiscal year ended March 31, 2026, and subsequent periods.

The company has responded by shifting resources toward hybrids and tightening spending. It plans to reduce the cost of its next-generation hybrid system by more than 30% compared with the system introduced in 2023 and improve manufacturing efficiency over the next five years.

Honda also plans to make greater use of outside suppliers and industry-standard components, including resources in China and India, as it seeks to improve the speed and cost of development.

That strategy could help Honda address one of the industry’s biggest challenges: maintaining investment in new technology while keeping vehicle prices competitive.

Chinese automakers have gained ground by developing vehicles more quickly and competing aggressively on price, while incorporating advanced software and driver-assistance features. Honda’s own strategy documents identify cost, development speed and software-defined vehicles as areas where it has fallen behind emerging competitors.

The supplier cost-cutting campaign is intended to address that gap. The internal documents reviewed by Reuters include requests for significant reductions in the prices of certain components, including pressed and forged parts, electrical components and software-defined vehicle-related parts.

Those supplier-specific targets have not been publicly confirmed by Honda.

Honda is also pursuing cooperation with other automakers to spread the cost of developing new vehicle technology. The company and Nissan have been working together on electronic and software technologies for future vehicles, part of a broader industry push to share the growing expense of developing software-defined vehicles.

For Honda, the immediate priority is restoring its core automobile business while preserving its ability to invest in the technologies that will define the next generation of vehicles.

The company has said it will take a more flexible approach to EV investment, while concentrating resources on hybrids and markets where it sees stronger opportunities for growth.