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Honda Motors may render a separate supply chain to reduce dependency on China

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As a result of the brewing political tension between the United States and China, coupled with the COVID-19 related output snarls, many Japanese companies are considering altering their supply chain operations. China has been home to manufacturing hubs of many big Japanese companies and supply chain disruptions are making them wonder if they should pull out of the region. Honda Motor Corp is no different and may render a new, separate supply chain in order to reduce their dependency on the China. Nearly 40% of Honda’s automobile production took place in China in the last financial year.

While Honda plans to keep enough resources in China to support its domestic market in the country, they plan to develop separate supply chain for markets outside China. The same has been reported by Japanese newspaper Sankei Shimbun. A Honda spokesperson said the Sankei report is not something announced by the company, adding it has been working on reviewing and risk-hedging its supply chain in general.

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,”

Honda Spokesperson

The Japanese government has been trying to lure the companies to bring back manufacturing to homeland, however, according to analysts it will be difficult for Japanese companies to suddenly completely move out of the markets they have made their place in, in terms of manufacturing and supply chain hubs. But the other side of the coin shows that Japanese companies are looking at ways to reduce their dependency on China.

Another Japanese automaker Mazda Motor Corp said this month, that it would ask its parts suppliers to increase stockpiles in Japan and produce components outside China, after the lockdowns destabilised supply, forcing it to shut down domestic production for 11 days in April and May. Mazda said it would seek to include higher domestic inventories and diversification of production outside China when forming contracts with suppliers for designing new models in the long term.

Back in January 2022, Honda had announced the construction of an all-electric car plant together with its Chinese joint venture partner Dongfeng, in Wuhan. The plant is to be located in the Chinese province of Hubei and will initially be designed for an annual capacity of 120,000 electric cars. It is scheduled to go into operation in 2024.

Credit: Reuters

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