Honda thrives in China’s slumping car market as its Civic, CR-V models prove popular with mainland consumers

Daniel Ren

Dongfeng Honda Automobile, one of the few winners in China’s car industry this year, said it would launch at least five new models next year as it bets on a turnaround in the world’s largest vehicle market.

The 50-50 joint venture between Japanese carmaker Honda Motor and its Chinese partner Dongfeng Motor Group said that the new models would include conventional petrol engine cars, pure electric vehicles and hybrids, without elaborating.

“We believe that opportunities arise in nuclear winter,” said Zheng Chunkai, executive vice-manager of Dongfeng Honda. “We want to inspire ourselves to achieve a higher goal [in 2020].”

The Wuhan-based carmaker sold 640,000 units between January and October, up 23.3 per cent year on year.

A Dongfeng Honda employee works on the Civic production line at the carmaker’s factory in Wuhan, Hubei province. Photo: AFP

Honda’s new models, including subcompact Civic and compact SUV CR-V, have seen strong sales growth this year after the joint-venture put its third factory in operation in April, which has an annual capacity of 240,000 units.

Dongfeng Honda has set a goal of selling 1 million cars a year in China.

China’s consumption upgrade props up shrinking car market with locally made premium models flying off the assembly line

Honda’s other mainland joint venture with Guangzhou-based GAC Group saw sales of 638,800 units in the first 10 months of this year, up 7.2 per cent from 2018.

Car sales in China, however, dropped for the 16th consecutive month in October, as a slowing economy amid the US-China trade war has deterred customers from buying big-ticket items such as vehicles. It has also put a dampener on carmakers’ business outlook amid weaker market demand.

Industry executives had expected the market to recover in the second half of this year, only to find consumer demand continues to remain weak.

The mainland reported passenger car sales of 1.93 million units last month, down 5.8 per cent year on year, according to the China Association of Automobile Manufacturers. For the January to October period, sales fell 11 per cent to 17.17 million units.

“Overall, the market outlook is bleak now that consumers are reluctant to spend on big-ticket items,” said Gao Shen, a Shanghai-based independent analyst specialising in the manufacturing sector. “A weak auto industry also drags down the overall economic growth.”

While the overall industry faces a slump in China, Japanese brands such as Toyota Motor and Honda have fared well, as their designs and fuel efficiency have proven popular with mainland drivers.

They are doing it by targeting what has proven to be a sweet spot in the faltering market – demand for hybrid petrol-electric cars.

We believe that opportunities arise in nuclear winter

Zheng Chunkai, executive vice-manager of Dongfeng Honda.

“The hybrid I drive now is as reliable as the one I used before but more fuel-efficient,” said Charles Wang, who bought a hybrid Toyota Camry in 2019 after driving a petrol-powered Honda Accord for six years. “I never regretted my choice of sticking to Japanese cars.”

Toyota, maker of the pioneer hybrid model Prius, and peers Honda and Nissan Motor have been early adopters of the technology that combines an internal combustion engine with an electric motor. That has allowed them to keep sales humming even as demand for petrol cars wanes and pure-electric vehicles are yet to catch on.

Japanese brands boosted sales 4.3 per cent in the first 10 months of the year, outpacing US, European, South Korean and Chinese rivals, according to China Passenger Car Association. Japan is now close to overtaking Germany as the biggest foreign car power in China, though Germany is benefiting from resilient demand for its premium models.

Sales of Japanese brands’ hybrids have risen about 30 per cent this year in China to more than 220,000, making the vehicles one of the fastest-growing market segment, according to the association. Japanese carmakers control about 99 per cent of the traditional hybrid market in China, according to numbers from consultancy WAYS Information Technology that exclude plug-in vehicles.

Additional reporting by Bloomberg

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