To say that Honda is going through a rough patch right now would be a bit of an understatement. Earlier this year, the company reported its first net annual loss since it went public in 1957, amounting to approximately $2.7 billion (423.9 billion yen). CEO Toshihiro Mibe nearly lost his job over it, Honda’s electric program is officially dead, and aggressive cost-cutting initiatives are now at the forefront of its business strategy.
The Japanese automaker expects to lose north of $12 billion in costs related to its failed EV aspirations, notably the stillborn 0 Series and Acura RSX revival. At the same time, pressure from Chinese competitors is growing at an alarming rate, so Honda needs to act fast before its finances are jeopardized. Naturally, the company is trying its best to reduce costs wherever possible.
Honda Plans To Save Close To $10 Billion By 2030
Honda 0 Alpha Saloon Concept JMSRoger Biermann/CarBuzz/Valnet
A recent Reuters report highlights Honda’s ambitious goal of saving $9.4 billion in the next four years, while also providing some interesting insights on how it plans to achieve this. According to an anonymous spokesperson, Honda bigwigs met with suppliers back in spring to discuss future plans for cost reductions.
That meeting ended with a few key takeaways. First, Honda wants to achieve a 30% drop in procurement costs for three distinct types of hardware – pressed and forged parts, electrical equipment, and stuff related to its software-defined vehicles. Besides that, the manufacturer expressed a desire to get more of its parts from Chinese suppliers, while urging current partners to take a similar approach where they can.
Honda also suggested that more standardized parts should be used from second- and third-tier suppliers, all in the name of keeping costs as low as possible. Putting things into perspective, this aligns quite neatly with the company’s recent decision to start co-developing ECUs and car operating software in collaboration with Nissan. One question remains, though.
Why Is Honda Taking Such Drastic Measures?
Based on what we know from Reuters, the main factor behind Honda’s aggressive push has to do with stiff competition from China. It’s getting increasingly difficult to compete with BYD and other Chinese brands as their products get more advanced while still undercutting established automakers by a wide margin. Faced with these challenges, Honda has no choice but to adapt in order to remain competitive.
CarBuzz Insight – Why This Matters
Honda CEO Toshihiro MibeHonda
We knew Honda was in trouble for quite some time, but this insider info sheds more light on just how serious the situation is. US tariffs, mounting pressure from China, billions lost in a failed EV strategy – Honda is dealing with all these things at once. And although Mibe has regained the board’s confidence for now, who’s to say he will manage to also keep it in the future?
All things considered, we’re very likely to see more cost-cutting measures implemented down the road, as saving nearly $10 billion in just four years will be far from easy. We’ll continue paying close attention to Honda’s trajectory moving forward, and it’ll certainly be interesting to see how it tackles these ongoing challenges.
Source: Reuters
