Recently, according to news from IT House, Honda China's car sales in September 2024 fell by 42.93% year-on-year. When analyzing this incident, we need to analyze the underlying reasons and possible impacts from multiple angles. China Exportsemi believes that this incident is not only Honda's own challenge, but also reflects the dilemma faced by the entire Japanese car brand in the Chinese market, especially under the general trend of new energy transformation, this phenomenon is more far-reaching.
1. The market shift behind Honda's declining sales
According to public data, Honda China's sales in September plummeted to 62,525 units from 109,666 units in the same period in 2023, a year-on-year decrease of 42.93%. Sales in August were also unsatisfactory at 56,959 units, indicating that Honda's sales in China have been in a downward channel for several months. This trend shows that Chinese consumers' car buying preferences are changing significantly.
According to data from the China Association of Automobile Manufacturers, the sales of new energy vehicles in China will reach 6.887 million units in 2023, accounting for 32.7% of the country's total sales. The market share of traditional fuel vehicles is gradually shrinking, and consumers are increasingly inclined to choose new energy models such as electric vehicles and plug-in hybrid vehicles. This change has had a direct impact on traditional automakers like Honda, especially Japanese brands that have been slow to electrify.
Figure: Sales plummeted by 42.93%, and Japanese cars in China were in the throes of new energy transformation
2. the new energy dilemma of Japanese cars
Not only Honda, but also the entire Japanese car brand in the Chinese market has not performed satisfactorily. In the first half of 2024, Toyota's sales fell by 5.9% year-on-year, while Nissan's sales fell by 15.8%. Japanese brands are slower to electrify because of their traditional advantages in the field of fuel vehicles, and on the other hand, their market positioning and technology of new energy models lag behind their competitors.
According to the China Passenger Car Association, from January to August 2024, domestic brands dominated the sales of new energy vehicles in the Chinese market, with BYD leading the way with a market share of more than 25%, followed by Tesla. This shows that consumers are more inclined to choose brands that are more innovative in electrification technology when choosing new energy vehicles. However, the poor performance of the new energy vehicle market of Japanese brands such as Honda has directly led to pressure on their overall sales.
Although Honda has made a layout in the field of new energy, launching the electrified model "e:N" series and the new electric brand "Ye", compared with competitors such as BYD, NIO, and Tesla, these models are relatively weak in terms of cost performance and range, and have failed to effectively attract consumers. In addition, the sales of new energy vehicles are also affected by government policies and infrastructure construction (such as charging piles), which are more responsive to domestic brands.
3. Competitor pressure and market strategy mistakes
The strong performance of competitors was also one of the important factors contributing to the decline in Honda's sales. Taking BYD as an example, BYD's new energy vehicle sales in the Chinese market exceeded 250,000 units in September 2024, a year-on-year increase of 45%. New car companies such as NIO and Xpeng are also expanding their market share. At the same time, Tesla continues to dominate the high-end market with its strengths in battery technology and autonomous driving.
In the face of such a fierce competitive environment, Honda's pace of product updates seems too slow. In 2024, Honda has not launched enough innovative products in the Chinese market, especially in the field of new energy vehicles, and Honda's product line and technology upgrades have not been able to keep up with the speed of market changes. In addition, Honda's marketing strategy has failed to effectively reach the younger generation of Chinese consumers, missing out on the core user group in the rapidly developing electric vehicle market.
4. Honda's electrification transformation strategy
In response to the crisis, Honda announced in July 2024 that it would adjust its production capacity in China, cutting annual production from 1.49 million units to 1.2 million units. This is the first time that Honda has cut production in China in more than 20 years, which means that Honda is aware of the drastic changes in the market environment and is taking measures to reduce excess fuel vehicle production capacity, and instead concentrate resources on promoting the development and production of new energy products.
Despite this, Honda's performance in new energy models is still not satisfactory. According to Honda CEO Toshihiro Mibe's latest remarks, if the demand for pure electric vehicles in the market does not grow as fast as expected in the future, the company may delay the construction of some battery production lines and further adjust its electrification strategy. This shows that Honda is re-evaluating the demand for electric vehicles on a global scale and flexibly adapting its strategy to the actual situation. However, delays in this strategy could put Honda further behind the competition, especially in a fast-growing new energy market like China.
5. Impact on the semiconductor industry
The decline in Honda's sales and the challenges of electrification are not only a phenomenon in the automotive manufacturing industry, but also have a direct impact on the development of the semiconductor industry. The development of electric vehicles and intelligent driving technology has greatly promoted the demand for automotive semiconductors. According to market research firm IC Insights, the global automotive semiconductor market is expected to reach $50 billion in 2024, up 15% year-on-year. Among them, the Chinese market accounts for more than 40% of global demand, becoming the main driving force for the growth of automotive semiconductors.
Honda's challenges in the EV market also mean that the demand for semiconductor technology is shifting. As automakers focus more on areas such as battery management systems, autonomous driving technology, and in-vehicle entertainment systems, the related semiconductor requirements are becoming more complex. For example, Honda's new models planned for 2024 will incorporate more power semiconductors for electric powertrains and AI processing chips for autonomous driving. This will put forward higher technical requirements for semiconductor manufacturers, especially in the design and manufacture of high-efficiency and energy-efficient chips.
At the same time, Honda's decision to reduce production may lead to a decrease in orders for semiconductors related to conventional fuel vehicles, especially engine control units (ECUs) and fuel system control chips. However, with the development of new energy vehicles and smart vehicles, the automotive semiconductor market will continue to grow rapidly in the next few years.
6. Conclusions
Behind the 42.93% year-on-year decline in Honda China's sales in September, it reflects the profound changes faced by traditional fuel vehicle brands in the Chinese market. The rapid development of China's new energy vehicle market has forced Japanese car brands such as Honda to re-examine their strategies in China and accelerate the transition to electrification. However, in the process of this transformation, Honda encountered many challenges such as the slow pace of product updates, poor market positioning, and strong pressure from competitors.
For the semiconductor industry, while Honda's declining sales may affect demand for some traditional automotive semiconductors, new market opportunities are emerging as electrification and intelligent technologies accelerate. Automotive semiconductor manufacturers need to seize this opportunity to develop more efficient and intelligent solutions to meet the needs of the EV market of the future.
Although Honda's transformation is full of challenges, it is still possible to regain growth momentum in the Chinese market in the future if it can adapt to market trends and seize the development opportunities of new energy and smart vehicles.
