Difficulty Selling Gasoline Vehicles and Lackluster Electric Vehicles

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Author: Wang Lei | Editor: Qin Zhangyong

I've read a statement that's quite interesting.

It says that if there was only one automaker left in the world, it would undoubtedly be Honda.

The basis for this statement is that Honda possesses numerous black technologies, with an extensive industrial chain that ranges from engines, transmissions, to motorcycles, cars, and even aircrafts, thus giving rise to the phrase "Honda's Greatness".

A fact is that Honda undoubtedly has technological advantages, but when it comes to the Chinese market, it would be dishonest for Honda to say they are not worried. Halfway through 2024, many Chinese automakers are showing off their achievements, with varying degrees of year-on-year growth, but Honda's figures are not impressive.

In June, Honda's sales in China were 68,966 units, a year-on-year drop of 39.04%, a nearly 40% decrease. From January to June, Honda's cumulative sales in China were 415,906 units, a year-on-year decrease of 21.5%.

Currently, Honda's two joint ventures in China, Guangqi Honda and Dongfeng Honda, have not released monthly sales figures separately, making it clear that sales are declining.

At present, Chinese brands represented by BYD are fiercely competing, inevitably clashing with foreign brands, dragging the Chinese auto market into a new battleground.

Honda's former greatness seems to have lost its appeal.

01 Significant Sales Decline, Popular Models No Longer Selling Well

In fact, it can be seen from the increasingly simple sales reports that their sales are getting worse. During the peak sales period, detailed figures for each specific model were included, but now it's just a matter of mentioning the total sales and annual cumulative sales.

From the cumulative sales this year, Honda's cumulative sales from January to June decreased by 21.5% year-on-year to 415,906 units. Among them, Guangqi Honda decreased by 26.5% to 216,532 units, and Dongfeng Honda decreased by 15.1% to 199,374 units.

After breaking down the monthly sales, except for January, which was decent, sales in other months were quite sluggish. In January, sales were 100,960 units, an increase of 57.3% year-on-year; in February, sales were directly halved to only 45,498 units, a year-on-year decrease of 38.6%; in March, sales were 60,449 units, a year-on-year decrease of 26.3%.

Even in the second quarter, Honda's sales remained low, with terminal sales of 73,831 units in April, a year-on-year decrease of 22.2%; terminal sales of 66,202 units in May, a year-on-year decrease of 34.7%; and sales of 68,966 units in June, which, although slightly increased month-on-month, still saw a year-on-year decrease of up to 39%.

Moreover, 2023 was already the third consecutive year of declining performance for Honda in China, but based on the trend in the first half of this year, 2024 may continue the trend of last year.

Honda China has not explained the reason for the decline in sales, but the answer is not difficult to find from the sales structure: once popular models are becoming less popular.

From January to May this year, Honda China's top three best-selling models were the Honda CR-V, Accord, and Civic, with sales of 72,300 units, 54,400 units, and 53,300 units, respectively, followed by the Breeze and Xingge, with sales of 42,500 units and 39,100 units, respectively.

However, a fact is that in today's market where the penetration rate of new energy vehicles has exceeded 50%, gasoline-powered vehicles are becoming increasingly difficult to sell.

According to statistics from the China Association of Automobile Manufacturers, domestic sales of passenger gasoline-powered vehicles in May were 863,000 units, a year-on-year decrease of 24.5%. With the overall market trending downward, the outcome for Honda, which relies mainly on gasoline-powered vehicles for sales, can be imagined.

Taking Honda's sales in China in May as an example, only the Accord, CR-V, and Breeze models exceeded 10,000 units in monthly sales, while among its 24 models, as many as 16 models had monthly sales of less than 2,000 units.

Especially popular models such as the Civic, Fit, and XR-V have seen significant declines. It should be noted that the XR-V model sold a cumulative total of 53,137 units from January to May 2022, but only 12,534 units from January to May this year, a decline of 76.4%. In just two years, the XR-V has gone from being a popular model to an unpopular one.

And its new energy models, e:NS1, Inspire PHEV, Lingpai, and e:NP 2, have monthly sales of less than 100 units.

Ten years ago, slogans like "One Honda, Lifetime Honda" and "Honda buys engines and gives away cars" were commonplace.

Known for its i-vtec engine and CVT transmission, this automotive brand launched a car and it became a hit, with models like the Fit, Civic, Accord, and Odyssey being sought-after in the terminal market, and creating classic models like the CR-V that pioneered the "hunger marketing" phenomenon.

Nowadays, these legendary cars are struggling to regain their glory, and the even more painful fact is that even selling at a discounted price has failed to turn the tide.

The Honda CR-V, which once pioneered the practice of selling cars at a premium, Honda's "evergreen" model, has seen its price system completely collapse. Previously, it cost over 200,000 yuan, but now it has dropped to 125,600 yuan.

Even so, the current CR-V only sells over 10,000 units per month, whereas during its peak sales period, monthly sales could approach 30,000 units.

Not only the CR-V, but another "Honda flagship" model has also had to bow to reality. The Guangqi Honda Accord, with a starting price of 197,800 yuan, has a maximum discount of 50,000 yuan, bringing the discounted price down to 147,800 yuan.

And this classic mid-size car was at its most glorious period over a decade ago. In August 2011, the Accord sold an astonishing 36,762 units in a single month, selling a total of 410,000 units for the entire year. Although its popularity has since subsided, it still regularly sold over 20,000 units per month.

Until February 2024, Accord sales plummeted to 6,519 units, setting a historical low. Although there has been a slight recovery in the past two months, it has come at the cost of significant profit sacrifice.

The sharp decline in Honda's sales in China has had a direct impact on its two joint ventures, Guangqi Honda and Dongfeng Honda, making their survival even more difficult.

Recently, Guangqi Honda made headlines due to layoffs, as the "N+2+1.8" compensation model resulted in layoff quotas being "snapped up" in just a few days. Behind the layoffs is the pressure on performance and the inevitable need to cut costs.

Guangqi Honda is struggling, and Dongfeng Honda is not faring much better. It is reported that Dongfeng Honda will also initiate a layoff plan in July, although the official has not yet responded.

02 Gasoline Is No Good, Electric Vehicles Also Need to Step Up

In addition to the shrinking gasoline vehicle market, Honda seems to be struggling in the fiercely competitive new energy vehicle market.

Taking April as an example, Honda's best-selling gasoline model was the CR-V, with 15,385 units sold; its best-selling plug-in hybrid model was the Accord PHEV, with only 551 units sold; and its pure electric model, e:NS1, sold a meager 186 units.

The once proud fuel economy and reliability of gasoline vehicles have become obsolete in the face of new energy vehicles.

In terms of fuel consumption alone, domestic brands have ended the long-standing myth of Japanese cars being fuel-efficient by leveraging their hybrid advantages. A fact is that when many people consider buying a fuel-efficient car, the first choice is to buy a domestic hybrid car represented by BYD.

In addition, new energy vehicles such as pure electric cars and plug-in hybrids have lower driving costs in urban areas and a higher degree of intelligence, giving them a natural advantage compared to Japanese cars.

If the fading of the gasoline vehicle halo is the main reason for Honda's declining sales, then slow electrification transformation is Honda's persistent problem amidst the wave.

Honda officially launched its electrification strategy for the Chinese market in October 2021, and its first pure electric model, Dongben e:NS1, was officially launched only last June, meaning its transformation speed has already fallen behind that of domestic brands.

Honda has successively launched four pure electric models, e:NS1, e:NS2, e:NP1, and e:NP2, whose names alone are quite cumbersome.

Their market presence after launch has also been quite low. Retail data shows that from January to May, Dongfeng Honda e:NS1 sold a cumulative total of 2,037 units, Guangqi Honda e:NP1 sold 413 units, Guangqi Honda e:NP2 sold 33 units, and Lieguang e:NS2 is a new model that was just released at the end of June this year.

The dismal market performance is not unfounded. Looking back at Honda's newly launched model e:NS2, its configuration appears unremarkable compared to a plethora of highly competitive new models.

With a range of only 545 kilometers, which is not particularly long for its class, it lacks a large sunroof. The front seats of the mid- and low-end versions cannot be heated, nor do they have ventilation functions, which are standard configurations in domestic cars of the same class. Its intelligent configuration, the car's chipset, does not even meet the standards of Qualcomm Snapdragon 8155.

However, facing the highly competitive market, Honda seems to have had a major epiphany, becoming more "aggressive" in its strategy. Its "electrification transformation plan" has undergone significant adjustments, advancing the deadline for "stopping the launch of gasoline vehicles" from 2030 to 2027.

By 2027, Honda plans to introduce 10 pure electric models into China, and by 2035, the sales proportion of pure electric vehicles will reach 100%.

Moreover, Honda will invest 10 trillion yen in electrification by 2030, double the amount it committed to in April 2022.

Honda also aims to build a local brand in the Chinese market. In addition to the e:N series already launched, it has also released a new pure electric vehicle brand, "Ye", with three globally launched models - Ye S7, Ye P7, and Ye GT CONCEPT.

It also emphasizes that the "Ye" brand is independently designed by the Honda China team, and to better cater to the Chinese market, it directly collaborates with domestic suppliers, not only using Huawei screens but also working with companies like CATL, Hangsheng Electronics, and Iflytek on other components.

Honda clearly does not want to lose China, the largest automobile market, but it remains to be seen whether the "Honda Greatness" of electrification will still be appealing.