Honda may seek to decouple its supply chain from China in the wake of strict COVID lockdowns and rising global tensions. The move would be a high profile sign of growing concerns in the market.
Japanese newspaper Sankei reports, without citing any specific sources, that Honda will continue to produce vehicle in China and supply parts for those vehicles domestically, while building a separate supply chain for vehicles made outside of the country, which is currently the second-largest economy on earth.
A Honda spokesperson told the outlet that a decision has not been announced by the company, but it has been working on reviewing risk-hedging its supply chain.
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“The review of the supply chain from China and risk hedging are elements that need to be considered, but it is not quite the same as the objective of decoupling,” the spokesperson said.
Nearly 40 percent of Honda’s automobile production was done in China in the company’s last fiscal year, reports Reuters, which will likely make a total decoupling difficult. The Japanese government has previously offered companies incentives to bring production back to the island nation, but automakers there have maintained that suddenly moving would be challenging.
Extensive COVID lockdowns have slowed production in many factories in China this year and the country is now going through one of the worst heatwaves in its history, which has further slowed production. Meanwhile, geopolitical tensions have led a number of manufacturers around the world to look for ways stabilize their supply lines.
Mazda, for instance, said this month that it has asked its suppliers to increase stockpiles in Japan and to produce components outside China after supply chain interruptions shut down its domestic production in the spring. Volkswagen and Mercedes, meanwhile, recently turned to North America to shore up their supplies of the resources necessary for EVs.
