GAC Honda Lays Off 7% of Workforce

Credit: Visual China

BEIJING, December 5 (TMTPOST) -- GAC Honda has dismissed 900 contract workers, more than 7% of the workforce, marking the first layoff since the inception of the joint-venture 25 years ago.

Traditional automotive leader GAC Honda faces unprecedented competitive pressures in a market rapidly transitioning to New Energy Vehicles (NEVs). Japanese joint ventures in China, like Toyota’s and Honda’s, are experiencing transition anxiety, with both announcing layoffs or production cuts in 2023. In July, GAC Toyota commenced layoffs of 1,000 people.

Set up in May 1998, GAC Honda, a joint venture between GAC Group (holding 50%), Honda R&D Co., Ltd. (holding 40%), and Honda R&D (China) Investment Co., Ltd. (holding 10%), had around 12,600 employees at the end of 2022. Primarily a gas-powered vehicle manufacturer, the company's output and sales exceeded 10 million units, the vast majority of which were gasoline cars. However, with NEVs speedily encroaching on the market share of traditional cars, GAC Honda has been on a decline. According to GAC Group announcements, the company's sales fell for two consecutive years, by 3.17% year over year in 2021 and 4.93% year over year in 2022.

GAC Honda produced 520,500 units in the first 10 months of 2023, a 134,400 unit decrease year on year and a record 20% decline. With this trend, the sale of GAC Group's own brand, GAC Aion, the NEV brand, is set to surpass GAC Honda in sales.

Recognizing the need for a shift towards NEVs, Honda launched five electric vehicle models in October 2021 and planned to stop rolling out new gasoline cars to the Chinese market post-2030, focusing instead on pure electric and hybrid models. However, two years on, GAC Honda only offers one electric model, the e:NP1, with less than 5,000 units sold in the first ten months of 2023. Its two plug-in hybrid models, the Accord e:PHEV and Breeze e:PHEV, also show modest sales. On the other side, GAC Honda’s new factory, set to start operations in 2024, is designed for NEV production with an annual capacity of 120,000 units, far exceeding the current annual NEV sales. Utilizing this new facility effectively remains a challenge.

An industry insider attributed the sales decline to slow adaptation to smart technologies, failing to meet rapidly changing consumer demands in China. The insider cites a new model developed based on three-year-old consumer research, now outdated in the current market. The layoffs are also attributed to product structure changes and production line automation upgrades, necessitating workforce adjustments.