Earlier this year, Honda dropped its plans to go full EV by 2040 and will instead focus more on hybrids. Not only that, but the automaker pulled the plug on three EVs, while net profit dropped 42% in fiscal year 2025.

With Honda realizing it needs to readjust its electrification plans and lower costs, the Japanese automaker has decided to do just that, as competition from Chinese brands continues to hound legacy automakers.

Recently, Honda has instructed suppliers to conduct drastic cost-cutting measures in a bid to save up to USD 9.4 billion in costs. Based on a report by Reuters, Honda was pressuring global suppliers to improve competitiveness and reduce prices by up to 30% on certain components. These include electrical parts, hardware for software-defined vehicles (SDVs), and pressed & forged components.

But perhaps the most telling aspect of Honda's plan to drastically reduce costs is the use of components made in China. In fact, Honda was reportedly encouraging suppliers to increase their use of parts made in China. Meanwhile, tier-two and tier-three suppliers are urged to produce standardized parts. This means Honda is banking on the cost advantage that helped Chinese automakers offer competitively priced vehicles across different markets.

This comes as a stark contrast to Japanese brands like Honda, which typically maintain an extensive network of domestic suppliers. But with Chinese brands effectively selling feature-packed cars at competitive prices, it seems Honda is urging its suppliers to look towards China to bring down production and parts costs.

With Honda scrambling to bring costs down as it tries to fend off Chinese automakers, we won't be surprised if other Japanese brands will also rethink how they build cars and try to cut costs against the continued rise of Chinese automakers taking a larger share of the car market globally.