Honda recently announced that it will lay off about 900 contract workers at its Chinese joint venture, GAC Honda Automobile Co., due to a rapid shift towards the electric vehicle market. The layoff accounts for 7% of the joint venture’s approximately 13,000 employees.
Honda stated that production is decreasing, hence the termination of contracts, but did not disclose which models’ production was reduced. As per regulations, Guangqi Honda will compensate the contract workers who leave early. This is the first layoff ever implemented by Honda since it started producing cars with China’s Guangzhou Automobile Group Co. (GAC) in 1998.
GAC Honda’s sales for the first 10 months of 2023 totalled about 490,000 units, a year-on-year decrease of 18.5%.
China and the United States are now Honda’s largest markets. While sales in the Chinese market, which accounts for 30% of total sales, fell nearly a fifth compared to the same period last year, Honda sold 3.2 million cars worldwide from January to October, thanks to the strong sales in the US market.
With the advent and growing popularity of electric vehicles, traditional automakers in China are grappling with a downturn, marking a pronounced shift in the industry’s landscape in recent years. In July, Toyota Motor laid off about 1,000 people at its joint venture in China, and another Chinese joint venture, FAW Toyota Motor, partially stopped production from Friday, due to weak sales. In addition, GAC Mitsubishi announced in October that it will become a wholly-owned subsidiary of the GAC Group, and its factory capacity will be taken over by Chinese electric car maker AION.