Honda Dongfeng Announces End of Production for Conventional Vehicles!

Honda Dongfeng Announces End of Production for Conventional Vehicles!

On July 16th, Honda Dongfeng officially announced its ambitious plan to accelerate the transition to electric vehicles (EVs). By 2025, more than 50% of its vehicles will be electrified, and after 2027, no new conventional fuel vehicles will be launched. The company aims to introduce over 10 pure electric models by 2030. With this move, Honda Dongfeng sets its sights on direct competition with leading EV manufacturers like BYD.

At the 2023 Shanghai Auto Show, Honda China declared its full entry into the era of electrification. From 2027 onwards, all Honda models introduced in China will be either hybrid or fully electric vehicles, phasing out new conventional fuel models. By 2035, Honda China envisions a complete transition to 100% pure electric vehicle sales. Given the rapid growth of new energy vehicles in the Chinese market, Honda China finds itself compelled to expedite its electrification process.

During the auto show, Honda China's e:N brand globally premiered three pure electric models, including the e:NP2 to be launched by Guangzhou Honda in early 2024 and the e:NS2 by Dongfeng Honda. The e:NP2 Prototype showcased is an almost final design developed by Honda China's team, featuring the specialized and efficient e:N Architecture F for pure electric vehicles. The Dongfeng Honda e:NS2, a medium-sized pure electric SUV, is set to hit the market in early 2024.

As one of the three major Japanese automakers, Honda is facing challenges in the Chinese market. In 2022, Honda's terminal sales in China reached 1.37 million units, a 12.1% YoY decline. During the first half of this year, Honda's cumulative terminal car sales in China dropped by 22.0% to 529,700 units. Both Guangzhou Honda and Dongfeng Honda dropped out of the top ten in terms of sales among domestic passenger car companies from January to June 2023.

Despite its determination to transition to electrification, Honda's pure electric models already on the market are not performing as expected. Currently, Honda China produces two pure electric models, the e:NS1 by Dongfeng Honda and the e:NP1 by Guangzhou Honda, both positioned as small-sized pure electric SUVs. However, since their launch, sales of both models have remained sluggish. For example, the Dongfeng Honda e:NS1 accumulated sales of 2,882 units, while Guangzhou Honda's e:NP1 reached 3,364 units in the first half of this year.

In response, Honda has started to shift its focus towards plug-in hybrids, discontinuing hybrid models. The all-new CR-V e:PHEV, launched on March 10th, incorporates the fourth-generation i-MMD dual-motor hybrid technology, with prices ranging from CNY 225,900 to 269,900. Additionally, Accord, XR-V, and Inspire have all introduced plug-in hybrid models, with the CR-V e:PHEV selling 3,581 units and the XR-V e:PHEV selling 2,812 units during the first half of the year. However, compared to other domestic plug-in hybrid models, Honda's offerings lack a competitive advantage in both pricing and product features.

Looking ahead, Honda faces significant pressure to rely mainly on conventional fuel vehicles to achieve sales as neither its pure electric nor plug-in hybrid models have gained significant traction. In the Chinese market, Honda's best-selling model in the first half of this year was the Accord, with cumulative sales of 94,400 units. Nevertheless, it still fell short compared to the Camry, which reached sales of 102,500 units. Other models, including CR-V and Civic, achieved 70,100 and 52,700 units, respectively, with the rest of the models all below 50,000 units.

As the era of conventional fuel vehicles wanes, Honda grapples with the challenge of how to stay competitive in China. While the automaker has revamped its core models like the XR-V, CR-V, HR-V, and Inspire, updating their exteriors and interiors to accumulate brand recognition and popularity, these updates have only been superficial. With the growing demand for electrification, consumers have become more discerning, and Honda must adapt to this changing landscape to retain its market position.

Honda's CEO, Yamahiro Sanbu, declared at the 2023 Shanghai Auto Show that other automakers have surged ahead in electrification, surpassing Honda's expectations by a considerable margin. Without a counter-strategy, Honda risks losing the competitive race. In response, Honda has undertaken a comprehensive restructuring of its China operations, including the merger of Honda Motor Technology (China) and Honda Engineering (China), consolidating six global market regions into "North America, China, and other regions," and establishing a new Electric Vehicle Development Division to focus exclusively on EV operations.

Amidst this intense competition and transformation, the auto industry finds itself in a fierce battle. With Tesla's low-priced models on the horizon and the imminent entry of Xiaomi into the market, traditional joint venture brands must brace for stiff competition. However, at present, homegrown brands have already taken the lead, and international giants like Honda must contemplate their strategies carefully to maintain their foothold in China.