The conservative Japanese car companies have begun to move forward with courage.
Recently, Honda held a press conference on various initiatives related to automotive electrification, including the promotion of electrification goals, procurement and production structure reform, electrification product line strategy, financial strategy, and other aspects. Honda CEO Minato Mibu stated that by 2030, Honda will invest 10 trillion yen (approximately RMB 462 billion) in an effort to transition towards electrification. This number is twice the 5 trillion yen promised by Honda in April 2022.
However, it is worth noting that Japanese car companies, including Honda, are facing a downward trend in sales in China. Pan Jun, Director of Product Strategy Consulting at a globally renowned consulting firm, told China Business News: "For Japanese car companies, the reasons for the decline in sales in the Chinese market may include intensified competition, brand positioning adjustments, and slow launch of new models. In addition, they also face many difficulties and challenges in the global market, including technological innovation, brand building, marketing strategies, and other challenges. Therefore, they need to be more proactive in responding to market changes and seeking new growth points."
Faced with various challenges, in the context of some international car companies deciding to slow down the process of electrification, Honda chose to "move forward with courage" at this time. "In addition to providing more advanced hybrid models to our global customers, we will also ensure stable profits by strengthening traditional fuel vehicles, including hybrid vehicles, and invest the generated funds in new businesses such as pure electric vehicles," said Honda.
Facing challenges in China
Recently, Honda Motor announced its consolidated financial results for the fiscal year 2023 (April 1, 2023 to March 31, 2024).
During the reporting period, Honda achieved a revenue of 20.43 trillion yen (approximately RMB 948.2 billion), compared to 16.9 trillion yen in the previous fiscal year, a year-on-year increase of 20.9%; Operating profit surged by 77% to 1.38 trillion yen (approximately 64 billion yuan), reaching a historic high from 0.78 trillion yen in the previous fiscal year; The operating profit margin is 6.8%; Net profit increased by 70% compared to the previous fiscal year to 1.11 trillion yen (approximately 51.5 billion yuan).
In terms of sales, Honda's global sales reached 4.109 million units during the reporting period, a year-on-year increase of 11%. The demand for hybrid vehicles in the US market has greatly increased revenue, with Honda delivering 1.63 million vehicles in the North American market in the fiscal year 2023, a year-on-year increase of 36%; Delivered 103000 vehicles in the European market, a year-on-year increase of 23%.
However, due to weak demand in the Chinese market, Honda's sales in the Asian market decreased by 5.3% to 1.65 million vehicles. Specifically, Honda's cumulative sales of terminal cars in China from January to April were 280738 units, a year-on-year decrease of 10.9%.
In fact, with the arrival of the "New Four Modernizations" and the rise of independent brands, the overall share of joint venture car companies in China has declined. According to data from the China Association of Automobile Manufacturers, mainstream joint venture brands sold 450000 vehicles in April, a year-on-year decrease of 26% and a month on month decrease of 9%. The retail share of Japanese brands was 15.2%, a year-on-year decrease of 3.6 percentage points.
Zheng Lei, Chief Economist of Samoye Cloud Technology Group, pointed out in an interview with reporters, "The rapid development of the domestic new energy vehicle market has brought pressure to Japanese cars. With the intensification of competition in the domestic automotive market and the upgrading of consumer demand, Japanese cars still need to continue to improve in brand influence, after-sales service, and other aspects."
Zhan Junhao, a well-known strategic positioning expert and founder of Fujian Huace Brand Positioning Consulting, said in an interview with reporters, "Currently, the three Japanese giants are actively undergoing electrification transformation, which is an important step in their response to the changes in the global automotive market. Although they started relatively late in the field of pure electric vehicles, they still have advantages in technology accumulation, brand value, and manufacturing experience. In order to achieve a smooth transformation, they need to increase investment in research and development, establish close cooperation with suppliers, and explore new business and service models to adapt to the characteristics of the Chinese electric vehicle market."
Accelerate the pace of transformation
In fact, as global cars shift towards electrification and intelligence, Honda has also accelerated its pace.
Specifically, Honda's software defined automotive related research and development expenditure is approximately 2 trillion yen; The investment and capital required to build a comprehensive value chain for pure electric vehicles in markets such as the United States, Canada, and Japan is approximately 2 trillion yen; The total production costs related to the next generation pure electric vehicle specialized factory, second wheel electrification related expenses, research and development expenses for new car models, mold investment, and other product manufacturing related expenses are about 6 trillion yen.
"When making investment decisions, we will evaluate the penetration level of the pure electric vehicle market, observe suitable investment opportunities, and flexibly carry out activities," said Honda.
Regarding the electrification transformation of Japanese car companies, Zheng Lei told reporters, "Their advantage lies in their rich experience in traditional car manufacturing and brand influence. However, they also need to face some challenges, such as how to solve battery supply problems, how to improve production efficiency, how to cope with fierce market competition, etc. Therefore, they need to formulate reasonable strategic plans, gradually promote electrification transformation, and focus on technology research and development and brand building to cope with future market competition."
It is understood that batteries are the core of electric vehicles, and Honda has also made a series of plans for this. For automotive companies, it is necessary to build corresponding value chains in stages from a long-term perspective to ensure high-level competitiveness.
Specifically, during the dawn of pure electric vehicles and in the field of liquid lithium-ion batteries, Honda will strengthen cooperation with external companies in various regions to ensure stable procurement of the required quantity of batteries while controlling costs.
During the transition period of electric vehicles: joint ventures with partner companies will begin to produce batteries. According to the plan, a battery factory jointly established with LG Energy Solution in the US market will be put into production in 2025, with an annual output of 40GWh of batteries. At the same time, Honda's business scope will also expand from automotive production to full lifecycle business areas such as charging services, energy services, and secondary utilization and recycling.
During the popularization period of pure electric vehicles, Honda plans to further expand its business scope, from raw material procurement to vehicle production, and then to the secondary utilization and recycling of batteries, to build a vertically integrated pure electric vehicle value chain with batteries as the core.
"We hope to achieve a reduction of over 20% in battery procurement costs in North America by 2030 through these efforts. In addition, we will ensure that each region can obtain the required batteries in the best possible way to meet the production plan of approximately 2 million pure electric vehicles," said Honda.
In terms of production lines, Honda is attempting to achieve a high level of global production efficiency by significantly increasing operating rates and reducing fixed costs. Compared to previous mixed flow production lines, it will save about 35% of production costs.
It is reported that Honda's new battery casing production line at its Anna factory in Ohio, USA, will introduce 6000 ton high-pressure die-casting machines and giant casting machines in the production of thin battery packs, which are crucial for pure electric vehicle production. This can greatly reduce the number of components and accessories in the battery casing, from a total of over 60 to 5, and will be combined with friction stir welding (FSW) technology to reduce investment and improve production efficiency.
On the assembly line of battery packs, the "Flex Cell production system" will be introduced first. This system can flexibly respond to changes in the production model and fluctuations in output. In addition, Honda also utilizes digital twins to reproduce the actual situation of production lines in real-time in cyberspace, optimizing production efficiency to ensure timely product delivery according to market demand.
"In the future, we will further expand the application scope of these technologies, and in addition to battery pack production lines, we will also apply and deploy them on all pure electric vehicle production lines," said Honda.