In a troubling development for the automotive industry, Honda is shutting down three more factories as its global sales continue to decline. According to EV YouTuber Sam Evans, known as The Electric Viking, the once-dominant car manufacturer is grappling with a severe drop in demand, leading to significant operational cutbacks.
Sharp Decline in Sales
Honda’s global sales have plummeted from 5.3 million units in 2018 to an estimated 3.4 million units this year. This sharp decline of nearly 2 million cars has forced the company to reassess its production capabilities and close factories worldwide, including in Japan, Thailand, and China.
Extensive Factory Closures
Evans reports that Honda’s closures are extensive, impacting major production facilities across the globe. “When I say all over the world, I literally mean all over the world—Japan, Thailand, China, the UK,” Evans emphasizes. The closures include Honda’s main production plant in Japan and several facilities in China, which are being shut down due to falling demand.
Questionable Asset Valuations
A significant point raised by Evans is the questionable valuation of these factories. Despite being listed as valuable assets, the reality of their closure suggests otherwise. “If it was really true that these factories are so valuable, Honda wouldn’t be doing this,” he argues, highlighting the discrepancy between the perceived and actual value of these facilities.
Chinese Market Struggles
The closures are particularly prominent in China, the world’s largest auto market. Honda is shutting down a plant operated through its joint venture with Chinese state-owned automaker Guangxi Automobile Group (GAC). This facility, which produced the Honda Accord sedan, had an annual production capacity of 50,000 vehicles. Another factory operated with Dongfeng is also ceasing operations, impacting an additional 250,000 vehicles per year.
Strategic Shifts and New Ventures
Despite these closures, Honda plans to increase its focus on electric vehicles (EVs) by beginning production at new plants in China in collaboration with GAC and Dongfeng. However, Evans points out that this strategy raises questions about the true value and utility of the existing factories being abandoned.
Southeast Asia Market Impact
In Southeast Asia, Honda is also consolidating its operations, closing another large factory in Thailand. This move reflects the tough conditions Japanese automakers face in the region, where aggressive competition from Chinese EV manufacturers is reshaping the market.
The Broader Industry Context
Evans draws parallels with other Japanese automakers facing similar challenges, such as Nissan and Mitsubishi, underscoring a broader industry trend. “If you don’t think it is for Honda, have a look at Mitsubishi, have a look at Jeep – what happened to them in China?” he asks, indicating that these companies are all struggling to maintain their foothold in a rapidly evolving market.
Commentary on Industry Valuations
A critical commentary from Evans questions the legality and accuracy of asset valuations reported by legacy automakers. “I don’t know why it’s legal for these companies to say on their Book value we own these factories worth billions of dollars when they just walk away and abandon them,” he remarks, pointing to the disparity between book values and market realities.
Future Projections and Challenges
Looking ahead, Evans predicts continued challenges for Honda and other Japanese automakers, especially in regions where Chinese brands are aggressively expanding. “Honda plans to make additional investments centered on its other plants, trying to convert them into factories that make hybrids in China,” he notes, but emphasizes the tough road ahead as these companies compete with technologically advanced and cost-effective Chinese vehicles.
“No Wonder No One is Buying the Cars”
People in the comments shared their thoughts: “$60k Aust dollars for a standard normal Civic sedan, are you joking. No wonder no one is buying their cars!!!”
Another commenter said: “The problem is prices too high for what is basically a tool to transport you. All the bells and whistles, sensors and computers have effectively turned autos into a disposable driving phone. Now prices need to reflect this new reality.”
One person added: “Test drove a 2024 CRV awd. I liked it for what it was. Dealer asking $38,500 usd. Came at me with a $44k asking for fees, taxes, and dealer BS. Wouldn’t budge on the asking price. I just walked away.”
A Shifting Landscape
Honda’s recent factory closures signal a critical juncture for the company as it navigates declining sales and increasing competition. The closures, spread across key global markets, reflect broader challenges faced by Japanese automakers in adapting to the shifting automotive landscape. As Honda attempts to pivot towards electric vehicles, the industry will be closely watching to see if these strategic shifts can revive the company’s fortunes.
Market Dynamics
What do you think? How will Honda’s strategic shift towards EV production impact its long-term market position? Should regulatory bodies reevaluate how automakers report the value of their manufacturing facilities? Can Japanese automakers effectively compete with the aggressive expansion of Chinese EV manufacturers?
Watch the entire video on The Electric Viking’s YouTube channel for more information here.
