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Honda Motor’s Production in China Recovers After Drastic Drop Due to the New Coronavirus

Honda Motor was forced to reduce production in February and March 2020 in China due to the spread of the new coronavirus, but it has returned to normal production by the end of April. Production has been increasing since then.

Honda’s production in China increased 4.3% from the previous year to 1.56 million units in 2019, setting a new record high. Dongfeng Honda, a joint venture with Dongfeng Motor, increased production 6.9% to 792,000 units in 2019. Honda’s other joint venture with GAC Motor called GAC Honda inched up 1.6% to 762,000 units. Dongfeng Honda had operated in excess of its production capacity until March 2019 when its production capacity increased thanks to the launch of a new plant with an annual production capacity of 120,000 units. Dongfeng Honda has an annual production capacity of 600,000 units, but further capacity expansion will be needed to expand sales. Meanwhile, GAC Honda increased annual production capacity by 120,000 units at the beginning of 2020. The company also gained another 50,000-unit annual production capacity by absorbing Honda Automobile (China), raising total capacity in China to 770,000 units.

The outbreak of the new coronavirus has greatly impacted Honda’s operations in China. Dongfeng Honda was forced to stop production in Wuhan, Hubei province, due to the outbreak of the virus, reducing production to zero in February. Production was partially resumed on March 11 but the number of vehicles manufactured in March dropped 84.9% compared to the same month of the previous year to 10 thousand units. The company resumed normal production by the end of April, volume increasing 34.1% year-on-year to 75,000 units in April.

GAC Honda returned to normal production by the end of March 2020. While production in March dropped 56.0% to 33,000 units, volume in April increased 12.6% to 77,000 units. In February and March 2020, the combined production of Dongfeng Honda and GAC Honda decreased by 170,000 units. Honda is expected to accelerate production in the coming months to make up for the loss in February and March.

Honda Motor: Recent Production Trends in China

Localization of electric vehicles

・Honda plans to concentrate the development and production of electric vehicles in China. – In addition to exporting electric vehicles from China to Europe, Honda may also export to Japan. ・In September 2019, Dongfeng Honda began mass production of X-NV electric model. ・In 2020, local production of the PHEV version of the CR-V is expected to begin. – The model is equipped with Sport Hybrid i-MMD system. ・In 2020, GAC Honda is scheduled to start production of the Crider HEV. – The powertrain combines a 1.5L gasoline engine with a i-MMD hybrid system. – The Crider HEV is the seventh Honda model launched in the Chinese market following the Accord, Inspire, CR-V, Breeze, Odyssey and Elysion.

Production capacity expansion

・By March 2020, GAC Honda has increased annual production capacity of the 3rd plant from 120,000 units to 240,000 units. – The plant manufactures BEVs and PHEVs. The total investment was 2.99 billion CNY. – As a result, GAC Honda’s annual production capacity expanded from 600,000 units to 720,000 units (capacity further expanded in April 2020 to 770,000 units by the merger with Honda Automobile (China)). – In addition, GAC Honda plans to invest 276 million CNY to convert some of the existing production lines for manufacturing BEVs and PHEVs (annual production capacity: 50,000 units). – GAC Honda’s annual production capacity of BEVs and PHEVs is planned to be increased to 170,000 units.

GAC Honda absorbs Honda (China)

・In April 2020, GAC Honda merged with Honda Automobile (China). – Along with the merger, the company’s name was changed from Honda Automobile (China) to GAC Honda Guangzhou Development Zone Factory. – Honda Automobile (China) was established in 2003. Originally the company was owned 55% by Honda Motor, 10% by Honda Motor (China) Investment, 25% GAC Motor and 10% by Dongfeng Motor. The joint venture became a wholly-owned subsidiary of GAC Honda in 2018. It employs 751 people (as of March 2020) and has an annual production capacity of 50,000 units. – The factory had plans to start production of the Accord for the Chinese market China after April 2020 while continuing production of the City for the Mexican market (zero automobiles were produced in April 2020 due to the new coronavirus).

Impact of the new coronavirus

・On January 23, 2020, Dongfeng Honda’s automobile plant and engine plant suspended production in Wuhan, Hubei province. – Production was halted during the Chinese New Year but it remained suspended due to the spread of the new coronavirus. ・Between the end of January and February 9, 2020, GAC Honda’s automobile and engine plants in Guangzhou, Dongfeng Honda’s parts plant in Huizhou and Honda Motor’s parts plant in Foshan suspended operation. ・On February 17, 2020, GAC Honda resumed partial operation. – As of March 12, 2020, operating ratio stood at approx. 50%. ・On February 20, 2020, Honda Automobile (China) resumed partial operation. ・By February 22, 2020, GAC Honda’s engine plant in Guangzhou, Dongfeng Honda’s parts plant in Huizhou and Honda Motor’s parts plant in Foshan resumed operation. ・On March 9, 2020, the local government permitted Dongfeng Honda to resume operations. ・On March 11, 2020, Dognfeng Honda restarted operation. – Initially, operating ratio stood at 10–20%. – As of March 17, 2020, TS Tech, which supplies parts to Dongfeng Honda, resumed partial operations at its Wuhan plant. – On March 18, 2020, Showa, which supplies parts to Dongfeng Honda, resumed power steering production at its Wuhan plant. On the 23th of the same month, Showa restarted shock absorber production. ・As of March 30, 2020, approx. 500 major Dongfeng Honda parts suppliers (of which 151 have bases in Wuhan) have restarted production. ・At the end of March 2020, GAC Honda began normal operation. ・As of April 13, 2020, the production volume of all three plants of Dongfeng Honda exceeded 3,000 units per day, returning to full operation. – More than 12,000 people, or 99% of the employees at the three factories, have returned to work. ・As of April 28, 2020, the operating rate of Honda's plants in China reached 95%. ・In February and March 2020, the combined production of Dongfeng Honda and GAC Honda decreased by 170,000 units.
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