- Honda will shut down gasoline vehicle plants in China to cut excess capacity and improve profitability.
- Declining sales and rising EV adoption are forcing a strategic shift in Honda’s China operations.
Honda is preparing to suspend operations at select gasoline-powered vehicle plants in China starting June, reflecting a major strategic adjustment in response to shifting market dynamics. The move comes as electric vehicles and intelligent mobility solutions gain rapid traction, putting pressure on traditional internal combustion engine production. As part of this transition, the company is focusing on optimizing its manufacturing footprint while addressing declining profitability in one of its most critical global markets.
GAC Honda and Dongfeng Honda Production Adjustments
One of the two gasoline vehicle plants operated by GAC Honda, a joint venture between Honda and Guangzhou Automobile Group, will be shut down. In parallel, discussions are ongoing regarding the possible closure of a gasoline vehicle facility under Dongfeng Honda, which is jointly operated with Dongfeng Motor Group. While the company has not officially confirmed the Dongfeng plant shutdown, the potential move indicates broader restructuring across its Chinese manufacturing network.
Production Capacity and Structural Impact
Currently, both GAC Honda and Dongfeng Honda maintain two gasoline vehicle plants and one new energy vehicle facility each, covering electric vehicle production. Their combined annual capacity includes 960,000 gasoline vehicles and 240,000 NEVs, totaling approximately 1.2 million units. The planned shutdowns are expected to reduce gasoline vehicle production capacity by nearly half, signaling a decisive shift toward electrified mobility and more efficient utilization of resources across operations.
China Production Capacity Breakdown
| Category | Annual Capacity |
|---|---|
| Gasoline Vehicles | 960,000 Units |
| New Energy Vehicles | 240,000 Units |
| Total Production | 1.2 Million Units |
Declining Performance and Market Pressures
Honda has been facing persistent challenges in China, largely due to a slower response to electrification and intelligent vehicle trends compared to competitors. Production forecasts for 2025 show a 13.8% year-on-year decline for GAC Honda, bringing output down to 354,114 units. Similarly, Dongfeng Honda is expected to see a 19.1% drop, reaching 328,175 units. These figures highlight underutilized production capacity and weakening operational efficiency.
Sales Decline and Strategic Reset
Sales performance in China has also deteriorated significantly, with projections indicating a 24.2% drop to 646,971 units. This sustained decline underscores the urgency for structural changes in manufacturing and product strategy. In response, Honda announced in March a comprehensive overhaul of its four-wheel vehicle business. This includes adapting to slower EV adoption in the United States while simultaneously addressing its competitive disadvantages in the Chinese market.
Financial Outlook and Long-Term Strategy
The company has also indicated potential financial strain, forecasting losses of up to 2.5 trillion yen for the fiscal years ending March 2026 and March 2027. These projections reflect the cost of restructuring, market repositioning, and ongoing investments in electrification. By reducing gasoline vehicle production and reallocating resources toward new energy vehicles, Honda aims to restore profitability and strengthen its position in an increasingly electrified global automotive landscape.
Frequently Asked Questions
Why is Honda closing gasoline vehicle plants in China?
Honda is shutting down gasoline vehicle plants in China to reduce excess production capacity and adapt to the rapid shift toward electric and intelligent vehicles. The decision reflects declining sales, lower capacity utilization, and increasing competition from EV manufacturers. By restructuring its manufacturing operations, Honda aims to improve profitability, align with market demand, and accelerate its transition toward electrified mobility solutions in one of the world’s largest automotive markets.
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