Key Takeaways
- Honda is set to shutter a joint venture facility with GAC Group in China by June 2026
- Another facility operated with Dongfeng Motor may cease operations in 2027
- These shutdowns will reduce Honda’s gasoline vehicle manufacturing capacity in China to approximately 480,000 units annually
- The strategic pullback forms part of a comprehensive transformation potentially costing $15.7 billion
- Honda’s Chinese market presence has deteriorated significantly as local electric vehicle manufacturers like BYD capture increasing market share
Honda is positioning itself to dramatically reduce its gasoline-powered vehicle manufacturing footprint in China. According to a Friday Reuters report citing industry sources, the Japanese automaker intends to cease operations at one of its collaborative manufacturing facilities with Guangzhou Automobile Group (GAC) by June 2026.
Another manufacturing site, operated through a partnership with Dongfeng Motor, faces potential closure in 2027. These strategic decisions represent Honda’s acknowledgment of dramatically weakening demand for traditional combustion engine vehicles throughout the Chinese automotive landscape.
Shuttering one facility from each collaborative venture will slash Honda’s Chinese gasoline vehicle manufacturing capability from approximately 960,000 units annually to about 480,000. Overall production capacity will decline to roughly 720,000 vehicles per year.
The magnitude of this withdrawal illustrates the dramatic transformation foreign car manufacturers face in China. Less than a decade ago, Honda ranked among the most sought-after international automotive brands throughout the country.
Chinese EV Giants Like BYD Capture Market Dominance
The fundamental challenge stems from intensifying competition. Homegrown Chinese electric vehicle producers, spearheaded by BYD, have aggressively expanded and seized substantial portions of the market previously controlled by international manufacturers.
BYD’s meteoric growth has particularly impacted Honda’s position. Chinese consumers have embraced electric mobility at an unprecedented rate that left many established automakers scrambling, prompting Honda to launch an extensive organizational transformation.
The comprehensive restructuring initiative Honda has embarked upon carries a potential price tag reaching $15.7 billion, Reuters indicates. This substantial investment underscores the depth of change required for the company to successfully pivot toward electric vehicle production.
While Honda hasn’t disclosed specific financial objectives connected to the Chinese plant closures, management frames these capacity reductions as necessary alignment with current market realities.
HMC Stock Valuation Below Long-Term Metrics
From a market perspective, HMC shares currently trade around $24.36, which GuruFocus estimates represents approximately 34% beneath its calculated intrinsic value of $36.90.
The automaker’s price-to-earnings ratio stands at 9.7x based on trailing twelve-month earnings, modestly higher than its five-year median of 8.27x.
Its GF Score registers at 74 out of 100. Both profitability and growth metrics earn 7 out of 10 ratings, while momentum scores merely 2 out of 10, indicating significant recent share price weakness.
Insider transactions show no recorded buying or selling activity over the previous three months.
Honda disclosed consolidated revenue of JPY 21.7 trillion for fiscal year 2025. Automobile sales represent 65% of total revenue, while motorcycle operations contribute 17%.
The company maintains a market capitalization of approximately $31.6 billion.
The GAC partnership facility closure scheduled for June will mark the initial tangible action in what appears to be an extended transformation of Honda’s Chinese business operations.
