Exclusive-Honda tells suppliers to cut costs in $9 billion push to fend off China, documents show

Japan's Honda has set a target of cutting $9 billion in costs over the next four years, according to internal documents and a source familiar with the matter. The plan comes as Honda seeks to defend itself against rising competition from Chinese electric vehicle (EV) manufacturers, such as BYD, which are gaining ground in various regions due to their advanced software and battery technology, as well as lower prices.

This aggressive cost-cutting strategy is one of the most significant moves by Japanese automakers in response to the intensifying competition from China. Honda, the world's largest motorcycle manufacturer, is also transitioning its focus towards gasoline-electric hybrids, as it anticipates EV-related losses to exceed $12 billion, one of the most substantial financial setbacks among global automakers.

The automaker aims to reduce its costs by 30% in three key parts categories: pressed and forged components, electrical parts, and parts related to software-defined vehicles (SDVs). These reductions would bolster Honda's competitiveness against Chinese rivals. Honda is encouraging its suppliers to review their material procurement processes, utilize standardized parts sourced from lower-tier suppliers, and source more components from Chinese suppliers.

The cost-cutting measures come amid Honda's first-ever annual loss as a publicly traded company and heightened expenses due to U.S. tariffs and higher labor costs. The shift in strategy follows Honda's decision to halt merger talks with Nissan, which would have created one of the world's largest automakers.