The most nourishing "two fields" in life began to convey cold air. On December 3, Honda, Japan’s second largest automaker, announced that it would lay off approximately 900 contract workers at its Chinese joint venture, Guangzhou Automobile Honda. At almost the same time, FAW Toyota said it would stop some production at its factory in Tianjin, China. In the past few years, the share of Japanese cars in the Chinese market has continued to expand. Toyota has become "the most profitable car company" with its lean production model. The success of "Two Fields" in China has also witnessed the rise of China's automobile industry.

Now that times have changed, these once fierce Japanese brands have to compromise with reality.

01. The first large-scale layoffs in history

It seems to be a well-established tradition among Japanese companies that they will not lay off employees no matter how difficult the situation is. In the local corporate culture, layoffs will not be a priority.

Of course, this tradition only applies to Japan itself.

In response to Guangmoto’s layoffs, Honda said:The laid off employees are all contract workers. After careful consideration, we terminated the personnel dispatch agreement with the labor service company.. For the labor dispatch personnel involved, Guangqi Honda will provide financial compensation in a timely manner in accordance with laws and regulations, actively assist relevant personnel in re-employment, and give priority to cooperation with laid-off employees.

Although they are employees dispatched by a third party, this layoff is Honda's first large-scale reduction in layoffs in the 25 years since it established Guangzhou Automobile Honda in 1998 as a joint venture with China's Guangzhou Automobile Company.

The reason given by Honda is also "justifiable".

Mainly because the rise of China's pure electric vehicle market has had an impact on Honda's traditional fuel vehicle market, resulting in a corresponding reduction in production and the termination of dispatch contracts.

On the other hand, in order to quickly shift to the electric vehicle market, Honda has adjusted and transformed its production lines to reduce costs and improve efficiency. Most of these laid-off employees are related to the fuel vehicle production line.

However, Honda has not yet disclosed which models will have their production cut.

When an enterprise's performance is poor, layoffs and salary reduction are often the simplest and most direct cost-cutting measures.The first blow will usually be on the labor dispatch personnel who are not "family members".

Interestingly, not long ago, Guangqi Honda just concluded the fourth Dream Festival, its annual fan-created car culture festival. The theme of this event is that GAC Honda will usher in a new era of smart electronics.

The reason why it is called the New Ten Million Smart Electric Era is because GAC Honda has achieved cumulative sales of 10 million units in the domestic market. It goes without saying that in the era of smart electronics, GAC Honda is facing a comprehensive transformation and accelerating the transformation of electrification in the domestic market.

As a mainstream domestic joint venture car brand, GAC Honda has been established for 25 years. It has launched many popular models on the market, such as Accord, Fit, etc. It is precisely because of the hot sales of these models that GAC Honda has achieved sales exceeding 10 million.

But these are just the past, and now Honda's domestic sales have begun to decline sharply. From January to October 2023, Honda sold 3.2 million vehicles globally.Sales in the Chinese market, which accounted for 30% of total sales, fell by nearly one-fifth compared with the same period last year, a decrease of 18.5%.

02. Toyota also began to reduce production

Not only is GAC Honda having a hard time, Toyota's joint venture in China, GAC Toyota, has also launched a wave of large-scale layoffs not long ago. The laid-off employees are mainly labor dispatch personnel, numbering about 1,000, mainly workers on the production line. Regular employees are also not included in the layoff plan.

The reason given by Toyota at the time was that price reductions and sales declines in the domestic market led to lower profits. "This is a normal phased adjustment. It is targeted at some dispatch employees and does not involve regular employees."

In addition to layoffs,Cutting production has also become a necessary choice for Toyota.

According to Reuters, FAW Toyota has suspended some production lines at its factory in Tianjin.

At present, FAW Toyota has several subsidiaries in Tianjin, including FAW Toyota Motor Co., Ltd., FAW Toyota Motor Co., Ltd. Technology R&D Branch, and FAW Toyota Engine (Tianjin) Co., Ltd.

Among them, FAW Toyota Motor Co., Ltd., established in August 2003, is Toyota's largest vehicle manufacturing base in China, with an annual production capacity of 620,000 vehicles. It is responsible for the production of Vios, Corolla, Asia Lion, Yize, Corolla Refine, Crown Landscape and other models.

FAW Toyota Engine (Tianjin) Co., Ltd. is responsible for the production of TNGA1.5/2.0/2.5L, 1.2T, NR1.5L, ZR-HV/PHEV1.8L and other engines.

As for the reason for the suspension of production, Toyota’s official answer is to optimize the production system."We will optimize the production system by taking into consideration the aging of models and changes in composition such as body type."

However, the official did not specify whether the vehicle plant or engine production was specifically suspended.

A Toyota official spokesperson said that the suspension of production at the Tianjin production base jointly owned by China FAW is a planned move, and Toyota is adjusting production according to changes in model composition.

However, Japan Jiji News Agency reported that Toyota is facing intensified competition in China, and the production suspension is part of its major production adjustments in response to weak sales of fuel vehicles.

Prior to this production suspension, FAW Toyota issued a "Letter to Dealer Partners" in November, stating that it would help dealers relieve inventory and financial pressure by reducing production.

It is reported that in order to alleviate inventory pressure, FAW Toyota announced that it will continue to reduce production on a large scale from December this year to February next year, despite already significantly reducing production in October and November. Toyota's production quota will be lowered to 66,000 units in December, 60,000 units in January and 38,000 units in February next year.

At that time, FAW Toyota insiders said that the production reduction was based on the current market competition environment, and said that their absolute inventory is not high, at about 1.1 months, but "the market price has dropped too seriously, and the sales side should try to reduce the capital cost of dealers' inventory vehicles to ease the pressure on dealers' income."

In addition to cutting production domestically, Toyota has also made adjustments in markets in other regions. According to reports,Toyota has halted production at its plants in Canada and plans to lay off thousands of jobs in the United States to cope with falling sales and cost pressures..

03. Have Japanese cars really declined?

From January to October 2023, Nissan's sales in China, including its two major business segments of passenger cars and light commercial vehicles, were 620,000 vehicles. Although the number is still considerable, it has plummeted 33.1% year-on-year. It has declined year-on-year for 15 consecutive months.

From Toyota to Honda to Nissan, these three "Japanese kings" have all encountered varying degrees of failure after entering the electrification era.

For Japanese cars, which still mainly rely on fuel-powered models, they can only watch their market share being eroded by Chinese brands. GAC Mitsubishi, which had previously announced its withdrawal from the Chinese market, had its production capacity taken over by GAC Aian, which is the best example.

Even Wei Jianbin, full-time deputy director of the manufacturing headquarters of Dongfeng Nissan Passenger Car Company and general manager of Guangzhou Fengshen Automobile Co., Ltd., said that the joint venture was indeed late in the layout of new energy and failed to catch up with the changes in the Chinese automobile market.

In fact, Japanese cars are under considerable pressure on both the production and sales sides. Public data shows that from January to October this year, FAW Toyota's cumulative retail sales were 651,800 vehicles, a slight increase of 0.8% year-on-year. The previous official sales target for 2023 was 1.02 million vehicles. There is a lot of pressure to achieve this goal.

Production reduction and suspension are adjustments Toyota has to make in response to changes in market demand.

At the same time, the halo of Japanese cars in the country in the past two years seems to have begun to dissipate with the advent of the new energy era.

Sales are falling, share is shrinking, and negative voices are rising one after another. Are Japanese cars really no longer good?

If you look at the domestic market, this is indeed the case. But looking at the global market, Japanese car companies can still make money.

Take Toyota as an example. Toyota's Q2 financial report for fiscal year 2024 released early last month showed that Toyota's vehicle sales revenue was 11.43 trillion yen, approximately RMB 556.6 billion, an increase of 24% from 9.22 trillion yen in the same period last year, and its net profit reached 62.2 billion yuan.

For comparison, BYD, which is also a benchmark for domestic automobiles, had operating income of 422.275 billion yuan and a net profit of 21.367 billion yuan in the first three quarters. Its revenue is close to 80% of Toyota's, but its net profit is only one-third of Toyota's, and its net profit margin level is also far lower than Toyota's.

It is no exaggeration to say that the net profit of Toyota Motor Corporation is equivalent to the combined profits of many Chinese automobile companies.

Let’s look at another set of data,From March to September 2023, Toyota's global production and sales exceeded 5 million vehicles, setting another record high.

In addition, Toyota also reiterated its sales forecast for 2024 of 11.38 million vehicles, but Toyota also realistically lowered its sales forecast for pure electric vehicles from the previous 202,000 vehicles to 123,000 vehicles.

Although Toyota, the world's largest automaker, is still mediocre in its electrification transformation, judging from the financial report data, it does not affect Toyota's ability to make money at all.

From this point of view, it is easier for Japanese cars to make money with fuel vehicles, but the market is irreversible and the popularity of new energy vehicles will eventually come. How long can Japanese cars continue to laugh?