According to Reuters, Honda is considering building a different supply chain outside China in a move to reduce its dependence on the world’s second-largest economy.
The news outlet cited the Japanese newspaper Sankei reported on Wednesday, August 24, about the significant move from the Japanese automaker.
As reported by Reuters, about 40% of Honda’s automobile production took place in China last year.
Reuters said Honda would keep its supply chain in China for the domestic market and build a different one for markets outside the country.
Honda spokesperson said, “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.”
Another Japanese automaker Mazda, also considers diversifying its production away from China as its latest data show the company’s first quarter performance was hit by strict Covid lockdown measures.
During the Shanghai lockdown, the company was forced to suspend China’s production for 11 days in April and May, disrupting its supply chain.
Mazda said it would build stockpiles of components in Japan and look for producing auto parts outside of China to reduce its dependence on the country.
Even having built substantial production hubs in China, many Japanese manufacturers shift their production lines out of China, and Covid-fighting measures are one of the key factors for the decision.
Before the Covid pandemic, Japan’s government reportedly would pay its manufacturers to move production lines out of China and back to Japan or to Southeast Asia. The program is seen as Japan’s effort to secure supply chains and reduce dependence on manufacturing in China.
At that time, experts said it would not be easy for Japanese manufacturers to abruptly shift away from a market where they had steadily built strong production and widespread logistics hubs.