Worrying Times For Honda As They Continue To Decline At A Rapid Rate

After experiencing a huge loss of nearly 16 billion dollars last year and announcing the closure of two factories in China, Honda continues to slide downwards – the company practically gives up the construction of two plants in Canada and withdraws from the South Korean market.

According to RTS, the Japanese media these days are reporting that the “Honda” corporation, which until recently was in second place in the production and sale of cars in the Land of the Rising Sun, continues a series of worrying failures, which is why questions are being asked about its future, even its bare survival.

Namely, on May 6, the company announced that it was postponing the construction of an electric car factory and a battery factory for those vehicles in the province of Ontario in Canada for an indefinite period of time, which is mostly interpreted in the media as abandoning those projects with a total value of 15 billion Canadian and 11 billion US dollars.

Strategic failure?

Last year, Honda decided to revise its electrification strategy, which envisioned investing a whopping $60 billion over the next 15 years to develop new electric models and convert existing models with internal combustion engines to electric vehicles. It did so because of the change of government in the US and the turn in environmental and economic policy that it brought – the abolition of US state subsidies for the purchase of electric cars and the introduction of tariffs on imported vehicles, which apply not only to Japan but also to Canada.

Honda, therefore, largely abandoned that strategy, abandoning the production of three electric models in the US, which caused it a loss of 15.7 billion dollars and pushed it into the red in the amount of 3.6 billion at the end of the last fiscal year (which ended at the end of March of this calendar year).

As part of that turnaround, “Honda” last year also announced the postponement of the construction of the aforementioned two plants in Canada for two years, although it had already purchased the land on which they were to be built. The management of that Japanese company, however, admitted last week that the postponement will be for an indefinite period, which can easily (officially) translate into a complete withdrawal. (Some media outlets in North America and Japan are already interpreting that “indefinite period” is actually a euphemism, which essentially means giving up.)

In the past, a leader, now a loser

However, one part of the grandiose “Honda” electrification plan, it seems, is still being implemented. It is about the fact that it has opened battery electric vehicle (BEV) factories in Guangzhou and Wuhan with its Chinese partners GAC and Dongfeng and that it has announced that due to this technological realignment, it will close one plant for the production of cars with a gasoline engine in those cities.

Those new electric vehicle factories in China, however, Japanese media report, are far from fully utilizing their production potential because “Honda’s” electric models lag behind domestic manufacturers, such as “BYD”, “Geely” or “Chery”, in terms of software solutions and entertainment content. Due to this and the fact that it was late in electrification, the sales of “Honda” four-wheelers in China in fiscal 2025 were almost half as low as in 2023.

Another ominous piece of news arrived last week, namely that the company is withdrawing from the South Korean market due to poor sales. This is even though Honda, which entered the Republic of Korea in 2003 after the liberalization of the import of foreign vehicles (during the 1990s, only about five to six thousand vehicles were imported from abroad in South Korea), was the first of the foreign manufacturers to exceed the level of 10,000 vehicles sold annually in that country, dominated by domestic factories Hyundai and KIA.

Namely, in 2008, Honda reached the figure of 12,356 cars sold in South Korea, but, after the boycott of Japanese goods in that country in 2019, caused by political friction due to the problem of monetary compensation to Korean workers who were exploited as slave labor during the Second World War, that number dropped drastically so that in the fiscal year 2025 it would finally slip below 2,000.

However, Japanese experts estimate that the withdrawal of Honda from South Korea is not a simple matter related to the aforementioned boycott but that it has a lot to do with the absence of a good, consistent strategy; that is, with the fact that the company remained committed to qualities such as good workmanship, car durability and pleasant driving. However, this is no longer enough, as customers in East Asia in recent years have been looking for informative and entertaining content that only well-done digitization and innovative software can provide. They also expect to receive all sorts of exclusive benefits with the car, such as free use of spaces such as cafes or discounts for hotels, travel and shopping.

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