Honda Is Looking To Reduce Its Supply Chain Dependence on China

Honda Motor Co's supply chain is highly dependent on China. Today, the Sankei newspaper reports that Honda is looking to build a separate supply chain to reduce its dependence on the Middle Kingdom.
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The pandemic has hit businesses worldwide, affecting them at every level. Given the increased COVID-related lockdowns China has been experiencing, it is putting increased pressure on the already affected supply chains. Many major manufacturers have built extensive production hubs in China. For instance, about 40% of Honda's automobile production in the last year has taken place in the Middle Kingdom. The tensions between the United States and China might also play a part in manufacturers looking to relocate their supply chains.

Reuters reported that another major player, Mazda Motor Corp., said earlier this month that it is asking its suppliers to increase stockpiles in Japan. Mazda started seeking parts elsewhere as it could not receive key components built in Shanghai during the spring lockdown.

After their supply chain was destabilized and domestic production was shut down for 11 days in April and May, the Japanese automaker reported a staggering operating loss of 19.5 billion yen ($144.4 million) for the first quarter of its financial year. Consequently, Mazda said it's looking to diversify production outside China by forming contracts with other suppliers when designing new models.

Regarding its domestic operations, Honda plans to keep its current supply chain in China while creating a separate one for markets outside the world's second-largest economy. While the Sankei newspaper doesn't state a source, a Honda spokesperson said their report is not something the company announced. What's more, they added that the company has been working to optimize its supply chain in general by reviewing and risk-hedging.

They didn't deny nor confirmed the report, and it's only natural that they're trying to make their supply chain as efficient as possible because any minor hiccup can considerably impact their numbers, as it happened to Mazda.


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