Key Takeaways
- Honda will close a joint venture facility with GAC Group in China by June 2026
- Another facility operated with Dongfeng Motor may shut down in 2027
- Total gasoline vehicle production capacity in China will drop from 960,000 to approximately 480,000 units annually
- The downsizing forms part of a comprehensive restructuring valued at up to $15.7 billion
- Declining sales driven by domestic electric vehicle manufacturers like BYD gaining market dominance
Honda is moving forward with dramatic reductions to its gasoline-powered vehicle manufacturing operations in China. According to a Friday Reuters report citing informed sources, the automaker intends to close one manufacturing facility operated through its partnership with Guangzhou Automobile Group (GAC) by June 2026.
Additionally, a second manufacturing site run jointly with Dongfeng Motor faces potential closure in 2027. These strategic decisions come as Honda confronts plummeting demand for traditional combustion engine vehicles throughout the Chinese automotive landscape.
Shuttering one production facility at each partnership will slash Honda’s Chinese gasoline vehicle manufacturing capability from approximately 960,000 units yearly down to around 480,000. Overall production capacity across all vehicle types would fall to roughly 720,000 units per year.
The magnitude of this withdrawal illustrates the dramatic transformation foreign automakers face in China. Until recently, Honda enjoyed status as among the most sought-after international automotive brands in the world’s largest car market.
Domestic EV Manufacturers Led by BYD Capture Market Share
The fundamental challenge centers on intensifying competition. Chinese electric vehicle producers, particularly BYD, have aggressively expanded and seized substantial portions of market share previously controlled by international brands.
BYD’s explosive growth has particularly pressured Honda’s position. Chinese consumers have embraced electric vehicles far more rapidly than many established automakers anticipated, forcing Honda into this comprehensive strategic reorganization.
The extensive restructuring Honda is executing carries a potential price tag reaching $15.7 billion, Reuters indicates. This substantial investment underscores the transformational scale required for the company to successfully pivot toward electric vehicle production.
While Honda hasn’t disclosed specific financial projections related to these Chinese plant closures, company representatives characterize the capacity reductions as aligning production capabilities with current market demand realities.
HMC Stock Valuation Below Historical Benchmarks
Regarding equity performance, HMC shares currently trade around $24.36, representing what GuruFocus calculates as approximately 34% below its estimated intrinsic value of $36.90.
The automaker’s price-to-earnings ratio stands at 9.7x based on trailing twelve-month results, modestly higher than its five-year median of 8.27x.
Its GF Score registers at 74 out of 100. Both profitability and growth metrics receive ratings of 7 out of 10, whereas momentum scores just 2 out of 10, indicating disappointing recent share price trends.
Insider transaction activity shows no purchases or sales during the previous three months.
Honda disclosed consolidated revenue of JPY 21.7 trillion for fiscal year 2025. Automobile sales comprise 65% of total revenue, while motorcycle operations contribute 17%.
The company maintains a market capitalization of approximately $31.6 billion.
The scheduled GAC partnership plant closure in June represents the initial tangible action in what appears to be an extended, multi-year transformation of Honda’s Chinese manufacturing footprint.
