Honda, Nissan Struggle to Fight Back in China Price War as BYD’s Sales Climb Ever Higher

By Fukutaro Yamashita and Taku Mukoyama / Yomiuri Shimbun Staff Writers

2:00 JST, December 23, 2024

Honda Motor Co. and Nissan Motor Co., expected to sign a memorandum toward their integration as early as Monday, will likely face a shared issue of how to deal with China — the world’s largest car market.

While China’s BYD Co. continues to perform well at home, the two Japanese carmakers are experiencing a severe decline in sales in the country, down about 50% from five years ago.

Price war

Despite it being the weekend, only a few customers could be seen in the dealership for Dongfeng Nissan Passenger Vehicle Co., Nissan’s Chinese joint venture, in Beijing on Saturday. Of the nine vehicles on display at the shop, seven were gas-powered, and the rest were hybrid vehicles. None were electric.

Nissan’s problem with having no “hot sellers” is particularly bad in China, said one company executive. Some gas-powered cars are sold at a hefty 33% discount in the country.

China has seen the rise of new energy vehicles (NEVs) such as EVs and plug-in hybrids. These account for about 40% of new car sales, the highest percentage among the major economies. BYD, the largest NEV automaker and a market leader, sold about 3.76 million vehicles from January to November, up 40% from the same period last year. Most of the cars were sold in China and all of them were NEVs. Sales were also up by a factor of eight from 2019, before the COVID-19 pandemic.

In contrast, Honda’s sales in China were down 31% to 740,000 units, while Nissan saw an 11% decline to 620,000 units. The two Japanese automakers will likely see their full-year sales decline by about half from 2019.

With BYD fighting a price war with no thought of profits, the Japanese and European giants have begun to lose their market share in a war of attrition, according to an executive at a major Japanese automaker.

Operating through joint ventures

Given the circumstances, Honda plans to cut its production capacity for gas-powered vehicles in China down to about 960,000 units, from about 1.5 million, by the end of the fiscal year. The company also plans to trim its workforce by several thousand people. It has been releasing EVs in China since 2022, but sales have been sluggish in a market dominated by low-priced vehicles.

The situation is even bleaker for Nissan. In 2021, the automaker upped its annual production capacity by 30% to 1.8 million units, assuming demand for its vehicles in the Chinese market would quickly recover from a pandemic-induced decline. This was a larger increase than was made by Toyota Motor Corp. or Honda at the time.

But demand did not recover as hoped. And despite its sales falling every year, Nissan in March produced a bullish mid-term plan with a yearly sales target for China of 1 million units by fiscal 2026.

When sales did not improve, Nissan President Makoto Uchida in November announced a change in the mid-term plan.

“In light of the current situation, we will review our targets,” he said, effectively withdrawing the initial plan.

A factory closure is also being considered due to the company’s poor performance lately, according to sources.

Honda and Nissan both manufacture their vehicles in China through joint ventures with local firms. Although they work with some of the same companies in the country, coordination with such firms will likely be rough going when it comes to streamlining for their integration.

According to a survey by major consulting firm Arthur D. Little, only about 10% of people in Japan would consider purchasing a Chinese EV, while in China 90% of people said they would. Consumer appetite shows just how difficult it will be to break the stronghold of Chinese automakers.

“Even if they integrate their businesses, it won’t be easy to halt the trend toward their business shrinking,” an industry insider in China said, referring to the planned move by Honda and Nissan.