Honda is pursuing an aggressive cost-cutting strategy after reporting its first net annual loss since going public in 1957, with the Japanese automaker now targeting $9.4 billion in savings over the next four years.
Honda Targets $9.4 Billion in Savings
A recent Reuters report details Honda’s plans to reduce costs, including discussions with suppliers held in the spring about future procurement savings, according to an anonymous spokesperson.
Honda wants to achieve a 30% reduction in procurement costs across three areas: pressed and forged parts, electrical equipment, and hardware related to its software-defined vehicles.
The automaker also wants to source more parts from Chinese suppliers and has encouraged existing suppliers to pursue similar opportunities where possible.
Honda additionally suggested increasing the use of standardized parts from second- and third-tier suppliers as part of its broader effort to keep costs under control.
Honda Faces Pressure After EV Setbacks
The cost-cutting push comes after Honda reported an approximately $2.7 billion (423.9 billion yen) net annual loss earlier this year. CEO Toshihiro Mibe nearly lost his job following the result, while Honda’s electric program is officially dead and cost reductions have moved to the forefront of the company’s strategy.
The company expects to lose more than $12 billion in costs associated with its failed EV aspirations, including the stillborn 0 Series and Acura RSX revival.
Honda is also facing growing pressure from Chinese competitors as it works to protect its finances and remain competitive.
More Standardized Parts and Software Development
Honda’s supplier strategy also aligns with its recent decision to co-develop ECUs and car operating software with Nissan.
The company’s push for greater standardization and lower procurement costs reflects the broader effort to reduce expenses as Honda responds to its financial challenges.
Why Honda Is Cutting Costs
According to Reuters, stiff competition from China is a key factor behind Honda’s aggressive cost-reduction strategy. BYD and other Chinese brands are becoming increasingly difficult to compete with as their products become more advanced while continuing to undercut established automakers by a wide margin.
Against that backdrop, Honda is moving to adapt its business and reduce expenses while facing pressure from multiple directions.
Honda’s Cost-Cutting Challenge
Honda is dealing with US tariffs, growing competition from China and billions of dollars in costs tied to its failed EV strategy at the same time. Although Mibe has regained the board’s confidence for now, the company’s challenges remain significant.
Honda’s goal of saving $9.4 billion within four years will require substantial cost reductions across its operations and supply chain as the automaker works to address its ongoing financial and competitive pressures.
