Japan’s Honda to close China plant, halt production at another factory

(Reuters) -Japan’s Honda (NYSE:) Motor will close a factory in China and halt vehicle production at another plant, the automaker said on Thursday, as it seeks to start producing more electric vehicles amid heavy competition from Chinese brands.

Honda will close a plant operated through its joint venture (JV) with Chinese state-owned automaker Guangzhou Automobile Group in October, a company spokesperson said.

The automaker has made the Accord sedan model at the plant, which was opened nearly two decades ago and has an annual production capacity of 50,000 vehicles.

Honda will pause production at another factory in China it operates through a separate JV with Dongfeng from November, the spokesperson said, adding that the site has an annual production capacity of 240,000 vehicles.

Honda seeks to optimise its output in China with the changes, the spokesperson said, adding that it faces tough conditions in the Chinese auto market, the world’s largest.

The company’s annual production capacity in China will shrink to 1.2 million vehicles from 1.49 million as a result of the stoppages, the spokesperson added.

It plans to bring it back up to 1.44 million vehicles by starting production at two EV plants it is currently building through its JVs with GAC and Dongfeng. The company aims to begin production at both new plants later this year.

Chinese automakers have made huge inroads in winning over domestic consumers with low-priced, software-loaded vehicles.

Honda and Nissan (OTC:) Motor are among Japanese brands for which China was a historically strong market but that are now taking a big hit from the rise of domestic automakers.

Nissan and Honda said in March they were considering a strategic partnership to collaborate on producing EV components and artificial intelligence in automotive software platforms.

The business daily first reported Honda’s plan to slash its annual production capacity in China earlier on Thursday.