Honda, the Japanese automotive giant, is set to lay off around 900 employees from its Chinese joint venture, GAC Honda. This move comes as the company adjusts to the shifting market focus towards electric vehicles (EVs). Notably, this marks the first instance of job cuts in the 25-year collaboration between Honda and Guangzhou Automobile Group Co., Ltd. (GAC).

TrendForce’s Insights:

1. Independent Brands in China Ascend but Japanese and Chinese Joint Ventures Decline

As per GAC Honda’s released data, the cumulative production and sales figures for the first ten months of 2023 witnessed a significant drop of 20.52% and 21.55%, totaling 520,500 and 499,400 vehicles, respectively. Apart from GAC Honda, both GAC Toyota and FAW Toyota have embarked on plans to scale back production or streamline personnel. Mitsubishi Motors announced officially to exit the Chinese market in October 2023, with GAC Aion taking over its factory.

Despite efforts by Japanese automakers to catch up EV revolution, the competition from independent brands remains formidable. GAC Honda and Dongfeng Honda introduced pure electric models like e:NP1 and e:NS1 in the Chinese market. GAC Toyota and FAW Toyota also entered the EV market with models like bZ3 and bZ4X.

However, facing intense competition from independent brands, joint ventures struggle to maintain market share. According to the China Passenger Car Association (CPCA) data, independent brands claimed 60% of the market share in October 2023, while joint venture brands dropped below 40%. This is a stark contrast to two years ago when independent brands held only 41.2% of the market.

Constrained by the cautious approach of Japanese automakers to vehicle electrification, joint ventures lack a robust lineup of pure electric models, relying mainly on hybrid models. Despite the hybrid technology’s strength in Japanese automakers, they are gradually losing ground to independent brands like Geely and BYD, resulting in a steady decline in joint venture brands’ market share.

2. Japanese Automakers Urged to Collaborate Openly with Chinese Counterparts

The hybrid models and brand strength of Japanese automakers continue to command a presence in the market, due to current challenges such as EV high prices and range anxiety. However, in the mature Chinese market for pure electric vehicles, Japanese automakers must cede more control over the development of joint venture models to Chinese manufacturers. An example of successful collaboration is Dongfeng Nissan’s Venucia, which is based on Dongfeng Motor’s technology, blending Chinese manufacturers’ expertise with Japanese automakers’ brand strength.

Japanese joint venture brands face challenges, highlighting the necessity for innovative advancements in model technology amid the new energy vehicle era. Faced with the trend towards higher intelligence and electrification in new energy vehicles, Japanese automakers must recognize that their current priority is not to surpass Chinese manufacturers but to navigate the electrification wave successfully. Joint venture brands act as a crucial lifeline, and Japanese automakers can bridge the technological gap by leveraging joint venture platforms, utilizing resources from Chinese manufacturers, and fostering collaboration. The key lies in Japanese automakers transitioning from market development leaders to active learners.

Ford announced the withdrawal of its full-year financial forecast due to the impact of the recent labor strike and ongoing challenges in the EV sector. Most consumers are reluctant to pay higher prices for electric cars compared to traditional or hybrid vehicles. Ford also postponed its planned $12 billion investment in expanding electric vehicle production capacity but remains committed to its goal of advancing its electric vehicle business.

TrendForce’s Insights:

1. Slower Market Demand Spurs Automakers to Rethink EV Strategies

The United Auto Workers (UAW) union initiated a six-week strike in Detroit starting on September 15, 2023, motivated by demands for improved compensation and benefits. The strike came to an end when consensus was reached with Ford, Stellantis, and GM (General Motors), resulting in the signing of a new contract.

According to predictions from Deutsche Bank, this new agreement will add an estimated $6.2 to $7.2 billion in costs for each of the three major automakers. This cost increase is nearly equivalent to the expense of building an electric vehicle platform. Compounded by the impact of slowing demand for global new energy vehicles (BEV and PHEV), with growth rates decreasing from 54% in 2022 to 30% in 2023, Ford announced the suspension of its $12 billion electric vehicle investment plan. This plan includes its partnership with SK On for a battery factory and a partly reduction in production capacity for the Mustang Mach-E.

2. Automakers Must Adopt More Practical EV Development Strategies to Address Price and Range Concerns

The slowdown in electric vehicle market demand stems from the issues of high vehicle prices and range anxiety, which affect consumer willingness to make a purchase. Addressing these two problems requires increasing battery energy density to achieve comparable driving range to conventional vehicles and constructing an adequate charging infrastructure. However, achieving these goals will take time and effort.

With range anxiety still unresolved and the goal of banning fossil fuel vehicles unchanged, automakers positioned between policy and the market face transition risks. At this juncture, choosing to independently develop electric vehicle platforms might add financial burden and risk, with the associated costs reflected in vehicle prices, potentially eroding competitiveness. A more practical approach would involve considering alternative development strategies, such as exploring platform outsourcing to reduce manufacturing costs.

Automakers or Tier 1 suppliers with proprietary electric vehicle platforms have the option to lease their platform production capacity to companies that are currently unable or unwilling to independently develop their own platforms. This strategy can increase production efficiency for lessees, allowing them to commission the production of all or some of their electric vehicle models from the lessor, ultimately reducing manufacturing costs and accelerating the release of new vehicle models.

By doing so, companies can maintain their market share in the electric vehicle race while waiting for the right opportunity to reevaluate the potential for developing their own electric vehicle platforms. In summary, as the demand for electric vehicles slows down, automakers will face tighter financial constraints, making it crucial for them to explore how to collaboratively leverage existing resources to create electric vehicles that align with market demands.

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• [News] Ford Shifts EV Investment Focus Amidst Fierce Price Competition

(Photo credit: Ford’s Facebook)

According to the latest data from TrendForce, car sales across 37 regional markets (as indicated in the notes under the table above) in August totaled 5.55 million vehicles, representing an increase of nearly 1% compared with July. This modest growth can be attributed to the upcoming launch of new vehicle models by automakers for the fall season. Some consumers were anticipating price reductions on existing models, while others were waiting for the release of new ones. Therefore, it is expected that car sales will be concentrated in the month of September.

The rankings of the top 10 car brands for August remained the same compared with July. The top three brands, in order, were Toyota, Volkswagen, and Honda. In August, the Japanese car market experienced a seasonal slowdown, leading to a drop in sales for most Japanese automakers. Compared with the previous month, Toyota posted a decline of 2.6%, whereas Honda posted a slight increase of 0.8%.

Chinese automaker BYD surpassed Ford to become the fourth-largest global car brand in terms of car sales for August. Despite the weakening demand in the domestic car market, BYD was not significantly affected as all of its offerings are new energy vehicles. BYD saw a 5% increase in car sales compared with July and was just 0.1 percentage point behind Honda in market share, which held the third position. Japanese automakers can still rely on demand from regional markets such as Southeast Asia to drive their vehicle sales. Therefore, accelerating the pace of overseas expansion is a key challenge for BYD if it seeks to surpass Honda on a global scale.

As for Ford, its performance in August showed a contraction in sales in Europe and the US. With a decline of 6.7% compared with the previous month, Ford dropped to sixth place.

While the launch of new vehicle models this fall is expected to boost new car sales, several factors continue to influence regional markets. These factors include the ongoing strike by the United Auto Workers in the US and Russia’s announcement on September 21st regarding restrictions on the exportation of gasoline and diesel. Russia’s actions could once again impact Europe’s energy supply and lead to a surge in oil prices. Such development could also disrupt governments’ efforts to ease inflation. If inflation heats up again, the consumer market might weaken further, and central banks could be compelled to raise interest rates once more.

China is currently stimulating domestic demand through various policies, but abnormal weather conditions in various parts of the country since the summer have affected local sales. In general, TrendForce believes that as the fourth quarter approaches, automakers will do their utmost to ensure smooth production, meet orders promptly, and spur sales during the year-end holiday season. They will strive to minimize the impact of the reduction in demand visibility caused by the latest economic turbulence.

TrendForce anticipates that by 2026, the global tally of public charging stations will soar to 16 million, marking an impressive threefold increase from 2023 figures. As this unfolds, the global ownership of NEVs—which includes both PHEVs and BEVs—will surge to 96 million. This sets the vehicle-to-charger ratio at 6:1, a significant drop from the 10:1 ratio observed in 2021. Notably, major players like China are paving the way; having set ambitious goals to achieve a vehicle-to-charger ratio of 2:1 by 2030, China is unquestionably a driving force in the global push to reduce this ratio.

Europe is steaming ahead with its net-zero blueprint, targeting the construction of a whopping 17 million charging stations by 2030. America, though, presents a contrasting picture. With a little over 200,000 charging stations currently, the Biden administration aspires to hit the 500,000 mark by 2026. Unfortunately, this will coincide with a projected NEV count of 15 million, exacerbating the vehicle-to-charger ratio to 32:1 Around the same period, Europe and China are projected to sport more modest ratios of approximately 9:1 and 4:1, respectively. Using Europe’s ratio as a yardstick, the US charging infrastructure ambition may need to be bolstered by at least three to four times.

NEV owners globally grapple with a maze of charging standards. Prominent among these are the US standard CCS1 (Combo), the European standard CCS2 (Combo), Japan’s CHAdeMO, China’s GB/T, and Tesla’s NACS standard. Europe and China offer a simpler scenario for their citizens by adhering to a single domestic standard. In contrast, the US is a battleground, with both CCS1 and NACS standards vying for dominance. While adapters provide a temporary bridge between the two, the rapid rise of NACS kindles apprehension among CCS1 aficionados about their future stake.

A diverse array of charging standards across the globe means charging equipment manufacturers must adopt flexible product strategies to cater to different market specifications. Spotlighting Taiwanese firms: Hotron Precision’s charging cables, Longwell’s and SINBOS’s integrated charging systems are all laying tracks across GB/T, CCS1, and CCS2 standards. A feather in the cap for Hotron Precision is its induction into Tesla’s supply chain, while Longwell and SINBON primarily cater to North American charging enterprises. Riding the wave, following proclamations by giants like Ford, GM, and Volvo favoring the NACS standard in North America, charging station behemoths like Zerova and LITEON have thrown their hats into the NACS ring.

From 2025, the landscape will shift dramatically as countries step on the gas to phase out gasoline-fueled vehicles. While the ramp-up of charging station infrastructure still lags, auto giants are bracing themselves to spearhead the charging station market boom. Case in point: Titans like GM, Mercedes-Benz, BMW, HONDA, Hyundai-Kia, and Stellantis are joining forces to spin off dedicated charging infrastructure companies. Furthermore, TrendForce offers a nugget of advice for Taiwanese manufacturers: to stay ahead of the curve and serve North American clientele more effectively, consider setting up shop locally. With Pegatron and Delta Electronics already marking their territory in Texas, the focus for Taiwanese firms should be on nimbleness and adaptability, ensuring they remain unshackled by a single standard.