Honda's Slumping China Sales Hit Japanese Suppliers, Spurring Diversification

Hit by the rapid rise of China's new energy vehicles, Honda’s internal combustion engine vehicle production and sales in China have come under sustained pressure, negatively impacting Japanese auto parts suppliers heavily reliant on Honda orders. According to statistics, nine major listed Japanese suppliers that primarily serve Honda have generally lowered their earnings forecasts for the next fiscal year—more than half anticipate a decline in global revenue, and nearly one-third expect a significant drop in net profit. Specifically, body parts manufacturer G-Tekt reported a loss of JPY 940 million from its China operations last fiscal year, mainly due to a more than 10% drop in Honda-related component order volumes. Suspension system supplier F-Tech expects its revenue from overseas Asian markets to fall by 21%, with profits nearly halved. Interior and seat maker TSTech forecasts a 22% decline in revenue and a 69% drop in profit from its China business. Chassis manufacturer H-One, which derives as much as 86% of its revenue from Honda, faces escalating operational risks following Honda’s consecutive years of sharp production cuts in China. Meanwhile, in response to intense price competition from Chinese domestic brands, Honda has implemented cost-reduction strategies and increased its procurement ratio of locally sourced components. Japanese suppliers, burdened by higher costs and inflexible pricing mechanisms, struggle to compete against local Chinese parts makers, further squeezing their market space. To reduce dependence on a single customer, several Japanese firms are actively diversifying their client portfolios: TSTech plans to double the share of non-Honda revenue over the next decade; Stanley Electric is expanding its partnerships with Chinese domestic automakers and overseas markets; and H-One is also actively seeking new collaborators to lessen its reliance on Honda for revenue.