Honda is looking to cut costs by more than $9 billion over the next four years and has put suppliers on notice that they will need to drastically reduce prices as part of the effort.
The details: The plan, revealed in documents obtained by Reuters, is being driven by intensifying competition from Chinese automakers as they aggressively expand their market presence.
Honda is targeting a 30% cost reduction across three key categories: pressed and forged components, electrical parts, and SDV-related parts, according to documents cited by Reuters.
The automaker has asked tier-one suppliers to review material procurement and use more standardized parts from second- and third-tier suppliers to cut costs.
Honda managers have also urged suppliers to increase their use of Chinese-made components where possible, according to the documents.
Why it matters: Lower component and production costs could help Honda remain competitive on vehicle pricing while preserving investment in future products and technology, potentially giving dealers a stronger lineup to sell as affordability becomes increasingly important to consumers.
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Between the lines: Inside sources say the cost-cutting measures are being pursued with a sense of urgency, highlighting the intense pressure Honda faces to turn around its operations.
Honda expects its EV-related losses to total more than $12 billion, one of the biggest hits among global automakers, per Reuters.
In May, the company reported its first-ever annual loss in its nearly 70-year history as a publicly traded company.
Honda announced on Monday that it was partnering with Nissan to develop computer components and software for vehicles to cut costs and remain competitive.
Bottom line: Honda’s ability to lower expenses without compromising product quality or future investment could potentially shape the competitiveness of the vehicles reaching dealer showrooms.
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