Honda may separate from Chinese supply chain

HONDA is considering building a separate supply chain that would reduce its dependence on China, says a report published in the Sankei newspaper this week.

The report suggests that the high-profile move would have wide-reaching global implications for the Japanese manufacturer, with nearly 40 per cent of its cars produced in China over the last financial year.

The Sankei did not state the source of its information but said Honda would continue to keep its supply chain in China for the domestic market while building a separate one for markets outside the world’s second-largest economy.

Speaking on the matter to Reuters, a Honda spokesperson said the Sankei report is not something announced by the brand but said it has been working on reviewing and risk-hedging its supply chain in general.

“The review of the supply chain from China and risk hedging are elements that need to be considered, but it is not quite the same as the objective of decoupling,” the source said.

Many of Japan’s larger automotive producers have formed extensive production hubs in China but have recently seen output impacted by the COVID-19 pandemic and associated microprocessor shortage.

Reuters further suggests that the deepening political tensions between China and the United States may also be behind the move to ‘decouple’ from the country.

All automotive manufactures maintain ongoing reviews of risks in their supply chains, particularly in Japan where natural disasters including earthquakes and tsunamis have been known to cause severe disruptions to vehicle parts production.

Reuters said that the Japanese government had previously offered Honda and other manufacturers incentives to return their parts and vehicle production facilities to Japan, though to date such moves have failed to materialize.

It is not known if the recent COVID-19 shutdowns in cities like Shanghai will reignite car manufacturers interest in the Japanese government’s proposal.

GoAuto understands that Mazda Motor Corporation is also seeking to stockpile parts in Japan and to produce components outside of China after recent lockdowns destabilized the company’s supplies, forcing it to shutdown domestic production for 11 dates in April and May.

Mazda told Reuters it would seek to include higher domestic inventories and diversification of production outside China when forming contracts with suppliers for designing new models in the long term.

With Automotive News, Reuters and Sankei.