Honda’s cost cuts can restore its mediocrity

BYD

08/09/2026 13:00

The author is a Reuters Breakingviews columnist.  The opinions expressed are her own.
By Katrina Hamlin
HONG KONG, Sept 8 (Reuters Breakingviews) - Honda Motor 7267.T is slashing costs but not enough to get out of the slow lane. The $49 billion Japanese carmaker wants to shrink expenses by more than $9 billion over four years, Reuters reported last week citing internal documents. Although that would allow CEO Toshihiro Mibe to drag the auto unit’s operating profit back to historical levels, he’d nonetheless find himself driving behind Chinese rivals like BYD 002594.SZ.
The country's vehicle manufacturers are grappling with a moment of reckoning as they try to remain competitive in the global market. Honda's cuts, which have not been publicly announced, amount to 375 billion yen ($2.45 billion) a year, or roughly 2.5% of the car business's annual revenue in that period, per forecasts compiled by Visible Alpha. That would be sufficient to boost the unit’s operating margin to over 5% by 2030, if it achieves the 16 trillion yen sales analysts expect. Profitability would then be roughly in line with 2017, its best performance over the past decade.
Yet from other angles, it leaves Honda mediocre. The targets are less ambitious than rival Nissan Motor’s 7201.T, whose two-year turnaround plan aims to shrink fixed and variable costs by 500 billion yen – nearly 4% of the group's forecast revenue – by the end of this financial year, a goal it's speeding towards.
Electric-car and battery maker BYD's operating margin could surpass 7% in 2029, Visible Alpha data show, three months before Honda’s cost-cutting campaign ends. The market expects the Chinese marque to sell 7 million vehicles in 2029, about double their expectations for Honda for its nearest comparable financial year. It's possible that Honda's eventual cuts may be larger, but as Japanese automakers lose share in key markets such as Southeast Asia it is getting harder to build economies of scale.
Honda's booming motorcycle business may encourage complacency too. Bikes generated a 20.5% operating margin in the three months to the end of June, four times the auto unit’s level. But Honda will remain troubled so long as its auto numbers lack power. 
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CONTEXT NEWS
Honda Motor is aiming to cut 1.5 trillion yen ($9.4 billion) in costs at its carmaking business over the four financial years from April this year to the end of March 2030, Reuters reported on September 2, citing internal documents and one person familiar with ‌the matter.
The company has also instructed suppliers to drastically reduce their prices, the report added. Honda is ‌aiming to ⁠reduce costs by 30% in three key parts categories: pressed and forged components, electrical parts, and parts related to software-defined vehicles (SDVs), according to the documents.
In a written response to questions from Reuters, a Honda spokesperson declined to comment on specific cost-reduction targets or details of discussions with suppliers. The automaker was working with suppliers globally to improve competitiveness and reduce costs, including through the use of standardised parts, the spokesperson said.

(Editing by Una Galani; Production by Aditya Srivastav)
((For previous columns by the author, Reuters customers can click on HAMLIN/katrina.hamlin@thomsonreuters.com; Reuters Messaging: katrina.hamlin.thomsonreuters.com@reuters.net))