Honda and GAC Renew Joint Venture Agreement Until 2038 to Boost Localization Amid China Sales Decline

On July 20, Honda Motor announced it has renewed its joint venture agreement with GAC Group, extending the partnership for GAC Honda until 2038 while maintaining the existing equity ratio. This move signals Honda’s continued commitment to the Chinese market and its plan to leverage its Chinese partner’s resources and technologies to enhance its market performance. Data shows that Honda’s sales in China have been in continuous decline since peaking at 1.63 million units in 2020. In 2025, its total retail sales in China dropped to 645,000 units, a 24% year-over-year decrease—marking the fifth consecutive year of decline. Specifically, GAC Honda’s sales fell from 807,000 units in 2020 to 352,000 units in 2025. In the first half of 2025 alone, Honda’s China sales declined by 35% year-over-year to 206,000 units, while GAC Honda’s sales during the same period plunged 46% to fewer than 90,000 units. The primary cause of this sales slump is Honda’s lagging electrification transition. Its e:N series of battery electric vehicles (BEVs), developed by retrofitting internal combustion engine platforms, are widely perceived by the market as “ICE-to-EV conversions.” These models struggle to compete with software-defined EVs launched by Chinese brands in terms of range, intelligence, and pricing. To bolster competitiveness, Honda plans to increasingly adopt locally sourced standard components and next-generation technologies in China and develop new energy vehicles based on platforms provided by its Chinese partners. Future models launched in China will rely more heavily on local supply chains and collaborative platforms rather than being imported from Japan. This strategic shift reflects the common challenges faced by foreign automakers in the Chinese market. Honda’s board of directors has decided to support the reappointment of current CEO Toshihiro Mibe, betting that his new localization strategy can reverse the company’s current downturn.