Honda Extends Joint Venture Agreement in China to 2038, CEO Admits 'We Took a Beating in China'

Despite persistently declining sales in China, Honda Motor Co., Ltd. announced in July 2026 the renewal of its joint venture agreement with GAC Group, extending the partnership of GAC Honda to 2038. The move signals Honda's firm long-term commitment to the Chinese market — and reflects the strategic dilemma foreign automakers face amid the electric transition.

According to Honda Automobile Investment (China) Co., Ltd., Honda's China subsidiary, its local sales have plunged from a peak of 1.63 million units in 2020 to just 645,000 units in 2025 — a nearly 60% decline. GAC Honda's sales fell from 807,000 units in 2020 to 352,000 in 2025; in the first half of 2026, they dropped another 46% year-on-year, totaling fewer than 90,000 units. Overall Honda deliveries in China declined 35% year-on-year to 206,000 units during the same period.

This precipitous sales collapse stems from delayed product portfolio transformation and lost ground to domestic competitors. In 2023, GAC Honda discontinued local production of Acura — a brand that subsequently exited the Chinese market entirely. Though Honda launched its e:N series of battery-electric vehicles in 2024 via its two joint ventures, these new models failed to challenge China's homegrown brands, which combine aggressive pricing with advanced intelligence. Honda's EV offerings are widely seen as lacking software-defined capabilities and cost competitiveness.

Toshihiro Mibe, Honda's President and CEO, candidly admitted in a July 18 interview with the Yomiuri Shimbun: "We took a beating in China." He stressed, "The future of the global auto industry will revolve around Chinese manufacturers — whose cost competitiveness has become the new industry benchmark," adding that "avoiding competition with Chinese players is tantamount to conceding defeat," making "cutting ties with our joint venture anything but wise."

Honda plans to rebuild competitiveness along three tracks: first, adopting locally standardized components to optimize costs; second, integrating new-energy vehicle platforms supplied by partners; and third, accelerating adoption of next-generation technologies developed in China. However, as of the official statement released on May 14, 2026, Honda has yet to disclose specific vehicle plans, platform sources, or technical collaboration details.