Honda tells suppliers to slash costs by 30% to fight Chinese EV rivals

Honda ↗ 3.62% is embarking on one of the most aggressive cost-reduction campaigns in Japanese automotive history, targeting ¥1.5 trillion ($9.4 billion) in savings by 2030 as it struggles to compete with fast-growing Chinese electric vehicle makers, according to a Reuters report citing internal company documents.reuters

Suppliers Face 30% Cuts

The automaker held a spring meeting with major suppliers at a convention center in Utsunomiya, north of Tokyo, where it laid out its cost-cutting blueprint, Reuters reported. Honda is seeking a 30% reduction across three parts categories: pressed and forged components, electrical parts, and components for software-defined vehicles. Following the meeting, individual suppliers received specific savings targets.finimize+1

Honda also told its tier-one suppliers to review procurement practices and increase their use of standardized parts from lower-tier suppliers. The company signaled it may expand purchases of Chinese-made components, a move intended to pressure Japanese partners into matching the pricing of Chinese rivals. One person familiar with the discussions described the targets as "extremely large" and questioned whether they could be achieved, while another said the situation left "no room for delay," according to Reuters.reuters+1

EV Losses and Strategic Pivot

The cost-cutting drive follows a bruising period for Honda. In May, the company posted its first annual loss since becoming a publicly traded company, driven by more than $9 billion in charges to restructure its electric vehicle business. Honda expects cumulative EV-related losses to eventually exceed $12 billion, prompting a strategic shift toward gasoline-electric hybrid vehicles.mezha+2

Chinese EV manufacturers led by BYD are expanding rapidly across Southeast Asia, Latin America, and Europe, competing on price, software, and battery technology. A Honda spokesperson declined to comment on specific savings targets or details of supplier negotiations but said the company was working with partners globally to improve competitiveness.arise+1

Industry Pressures Mount

Honda and Nissan announced on Monday plans to jointly develop standardized electronic control units for software-defined vehicles, targeting deployment from fiscal year 2029. The two companies abandoned merger talks last year that could have created one of the world's largest automakers.mezha

Honda shares fell on Wednesday following the Reuters report, with several suppliers including seat maker T.S. Tech TS Tech Co., Ltd. and frame manufacturer H-One also declining. Beyond Chinese competition, Honda and its peers face U.S. import tariffs, rising labor costs, and mounting research and development expenses as vehicles grow more technologically complex.mezha