Honda: Partnering with IT companies in Japan, the U.S., and China on advanced technologies

Honda China’s sales volumes grows 2.3 times over past 5 years

2018/10/05

Summary

Inspire
Accord sibling car 'Inspire', released by Dongfeng Honda in the second half of 2018 (Beijing Motor Show 2018)

 This report provides an overview of Honda's China operations and autonomous driving and electrification initiatives (Honda’s "open innovation" strategy) underway in various partnerships with companies in fields such as the IT industry in Japan, the U.S.and China.

 Honda China's sales (factory shipments) increased by 2.3 times during the five years from 2012 to 2017. The introduction of sibling cars in 2014 (China-specific models based on the same platform, and manufactured and sold by the Guangzhou Honda and Dongfeng Honda joint ventures) has contributed to success of Honda China’s operations. However, in early 2018 the CR-V was recalled, resulting in a 2.1% decrease in sales volumes over the January to August timeframe compared to the same period in the previous year (retail sales were down 7.1%).

 Honda has announced its plans to replace two thirds of the vehicles it sells globally with electrified vehicles by 2030 (about 15% FCVs and EVs, and more than 50% PHVs and HVs). Honda plans to introduce more than 20 new models of electric powered vehicles in the Chinese market by 2025.

Regarding autonomous driving, Honda aims to put into practical use autonomous driving technologies for multi-lane highway driving in 2020, and to establish Level 4 capability technologies for personal car use in 2025.

 To that end, Honda is promoting "open innovation" to cooperate with a number of cutting edge companies in fields such as the IT industry. The second half of this report covers some of the various partnerships that Honda is promoting in Japan, the U.S., and China. In the U.S. and Japan, Honda has partnered with Alphabet’s Waymo (automated driving), SoftBank (AI and 5G communications), GM (lithium-ion battery and hydrogen fuel cell system), and others. In China, where Honda is particularly focused, the automaker is collaborating extensively with companies such as Neusoft (core electrification technologies), Reachstar (car sharing), CATL (EV drive batteries), Baidu (automated driving), and SenseTime (artificial intelligence (AI)).

 

Related report:
Honda's Product Plans: Aggressive introduction of electrified vehicles (September 2018)

 



Expanded sales in the China market by 2.3 times over 5 years

Honda's unit sales (factory shipments) in the Chinese market increased by 2.3 times over the five year period from 2012 to 2017. In recent years, Honda sales volumes have grown rapidly by 23.2% in 2015, 22.2% in 2016, and 17.8% in 2017. As seen in the table below, sales of SUVs such as the CR-V have increased significantly.

In FY 2017, the number of retail sales in the U.S., Honda's largest market, was 1.639 million vehicles, representing a decrease of 0.4%, and in China sales volumes increased 11.5% to 1.451 million units, with the difference between the sales volume in the two countries being merely 188,000 units. Honda says that its U.S. sales volumes have entered an adjustment phase, and that China sales volumes are expected to exceed those in the U.S. in the near future.

Honda's unit sales (factory shipments) In China

  2012 2013 2014 2015 2016 2017 Jan.-Aug.
2017
Jan.-Aug
2018
2018/2017
Car 430,808 523,791 514,014 491,254 594,708 685,635 442,639 447,997 1.2%
SUV 169,036 189,972 191,263 402,194 522,557 633,491 385,120 347,722 -9.7%
MPV 27,766 67,223 105,683 105,270 103,150 118,461 74,730 87,655 17.3%
Total 627,610 780,986 810,960 998,718 1,220,415 1,437,587 902,489 883,374 -2.1%
                   
Retail sales - - - 1,006,332 1,247,713 1,441,307 886,641 832,248 -7.1%

Source: MarkLines Data Center

Note 1. Factory shipments include vehicles for export. Include Acura CDX and TLX-L made in China from 2017. Do not include sales of imported vehicles.

      2. Retail sales include sales of imported vehicles. Do not include sales of Acura brand vehicles between 2015 and 2017.

Sibling car strategy successful

Honda’s sibling model strategy has contributed to its rapid expansion in China. Until recently, the two Honda joint ventures in China sold different Honda models, making it difficult to expand the product lineup. Therefore, Honda decided to differentiate the brands of the JVs by modifying the interior and exterior of what is essentially the same vehicle, with each joint venture releasing a sibling variant. The Guangqi Honda brand has been given a high-class, sophisticated image, while the Dongfeng Honda brand has been given a more sporty image.

 The compact Vezel SUV sibling model was first sold by Guangqi Honda from 2014, while Dongfeng Honda launched a sibling model of the XR-V in 2015 after giving it powerful design, which emphasized the bumper area. Other siblings included in the brand lineups are mid-size minivans (the Guangqi Honda Odyssey and the Dongfeng Honda Elysion), mid-size sedans (the Accord and the Inspire released in late 2018), and compact sedans (the City and the GREIZ).

 Honda China’s sales are solid for models such as the Accord and CR-V, but weak for sedans in the B Segment. Honda plans to expand its sales network in regional cities in the future, which means the enhancement of its entry model lineup is essential.

Accord Inspire
The Accord (photo left) sold by Guangqi Honda and its sibling, the Inspire, (photo right) is scheduled to be released by Dongfeng Honda in the second half of 2018 (Beijing Motor Show 2018)

Unit sales by model (Guangqi Honda and Dongfeng Honda)

    Guangqi Honda Dongfeng Honda
Model Unit sales Model Unit sales
2016 2017 2016 2017
Sibling models Compact SUV Vezel 168,373 151,839 XR-V 165,358 163,550
Compact sedan City 78,177 67,626 GREIZ 46,651 28,983
Mid-sized car Accord 134,821 155,341 Inspire - -
Large SUV Avancier 4,633 85,951 UR-V - 39,909
Minivan Odyssey 44,058 39,913 Elysion 30,110 40,921
Other major models Fit 114,818 110,229 CR-V 187,133 187,641
Crider 92,431 103,321 Civic 90,507 176,457
Crosstour 9,877 37 JADE 40,975 41,871
Other 4,818 25 Other 34,971 47,693
Acura vehicle 8,413 16,348 - - -
Total   660,419 730,630   595,705 727,025

Source: Honda (China)

Note: The Inspire will be released by Dongfeng Honda in the second half of 2018.

Sales from January to August 2018 declined by 2.1% from the previous year (retail sales fell 7.1%), negatively impacted by the CR-V recall

 Honda China’s sales volumes (factory shipments) from January to August 2018 decreased by 2.1% compared to the same period last year. Honda China was forced to stop selling the CR-V from March to April 2018 due to the recall associated with an engine issue. As a result, Honda's sales in China (retail) from April to June 2018 decreased by 6.4% to 321,000 units compared to the previous year. The CR-V was the best-selling Honda model in 2016 and 2017, so the impact of the recall greatly affected Honda China sales volumes.

Although sales of the CR-V have resumed, sales volumes in July and August seem to have been negatively impacted by about 40% compared to the same month in the previous year. The retail sales of Honda's two joint ventures were down 10.7% in July and 6.2% in August compared to the previous year, and down 7.1% for the period from January to August.

In addition, the number of new car sales (factory shipments) by all automakers in China decreased by 4.0% in July and decreased by 3.8% in August (while recording a 3.5% increase for the January to August 2018 timeframe). Concerns over the U.S. - China trade war and falling stock prices are believed to have negatively influenced consumer purchasing sentiment.



Increased production capacity in China: 1.25 million units in the first half of 2019, Guangqi Honda considering a 120,000 unit increase in production capacity

 Honda's nominal production capacity in China as of March 2018, including its export-only plant, is 1.13 million units per year, but in 2017 Honda produced 1.47 million for the growing China market, where its supply capacity is unable to keep up with demand.

Dongfeng Honda's third plant (annual capacity of 120,000 units) is under construction and scheduled to start operation in the first half of 2019. The third plant will boost Dongfeng Honda's annual capacity to 600,000 units and Honda's overall automobile production capacity in China to 1.25 million, including 600,000 from Guangqi Honda and 50,000 from the Honda Automobile (China) export-only plant. The new Dongfeng Honda plant will allow Honda to boost its local production capacity of electrified vehicles, including EVs, for which the market demand is expected to increase in the future.

 In addition, Honda Guangqi is considering plans to increase the production capacity of its third finished car plant (production capacity 120,000 units), thereby allowing it to double the plant’s capacity to 240,000 units. If Honda decides to move forward with the expansion plan, this would give Honda a total production capacity in China of 1.37 million units.

Honda is also increasing the number of Acura brand models produced in China. In 2016 Honda started local production of its CDX compact SUV and in 2017 the TLX-L (both models are specifically for China) in 2017. In 2018 Honda will start production of the RDX medium size SUV.

 The capital structure of the export-only plant (production capacity 50,000 units) of Honda Automobile Co., Ltd. was originally established at 65% for Honda, 25% for the GAC Group, and 10% for the Dongfeng Motor Group, but has since been made a 100% subsidiary of Guangqi Honda in May 2018.

Acura CDX Acura RDX
The Acura CDX subcompact SUV has been manufactured in China since 2016 (Beijing Motor Show 2018) Local manufacturing of the Acura RDX will start by the end of 2018 (Beijing Motor Show 2018)


Promoting "open innovation" with external partners in response to the rapid development of electrification and autonomous driving

 Honda established the Honda Research Institute (HRI) as a subsidiary of the Honda Institute of Technology in 2003. Honda established outsourcing operations in Silicon Valley, successfully conducting research related to collaboration with local startup companies. To respond to the rapid evolution of electrification and the progress of autonomous driving technologies in recent years, Honda is actively promoting "open innovation" with external partners to acquire the digital technologies that are insufficient among automakers.

Honda Innovation Lab Tokyo:

 In September 2016, to strengthen is capability to develop intelligent technologies for mobility, Honda established a new operation, the Honda Innovation Lab Tokyo in Akasaka, Tokyo, under the umbrella of the Honda Institute of Technology, to serve as a venue for “co-creation” to collaborate with external experts and research institutions. The R&D Innovation Lab collaborates with the Honda Silicon Valley Lab (HSVL) and other HRI operations to promote research and development in the U.S.

 Since 2015 Honda R&D has been promoting its Honda Xcelerator open innovation program in partnership with startups in Silicon Valley, Boston, and Israel. In November 2017, Honda announced that it is expanding its global open innovation program for early stage innovators to Detroit, Japan, China, and Europe using the company's local subsidiary network.



Advanced technology partnerships in Japan and the U.S.: Partnerships with companies such as Waymo, Softbank, GM, and Hitachi AMS

Transformation partnerships (Source: Honda)

Under the aforementioned Xcelerator open innovation strategic program, Honda is promoting partnerships with IT companies and many other companies and organizations in advanced fields such as electrification and autonomous driving. Outlined below are some of Honda’s activities in Japan and the United States. 

 In relation to electrification, Honda partnered with GM for the development of hydrogen fuel cell systems, then for the development of EV batteries. Also, Honda partnered with Hitachi Automotive Systems (Hitachi AMS) to manufacture EV drive motors in the U.S.

 Regarding artificial intelligence (AI), following the start of its collaboration with SoftBank, Honda announced research partnerships with Kyoto University and Boston University.

In relation to autonomous driving, in December 2016, Honda began the joint development of automated driving technologies with Waymo, a subsidiary company of Alphabet Inc., the holding company of Google. Also, Honda is collaborating with SoftBank on technologies associated with the 5th generation mobile communication system (5G).

In car sharing, Honda will collaborate with Zipcar in the U.S., and with Grab to jointly develop the motorcycle sharing business in Southeast Asia.

 

Partnerships in advanced fields in Japan and the United States:

■Electrifications

Field Partner Descriptions
EV batteries GM In June 2018 GM and Honda agreed to collaborate on next-generation battery components including battery cells and modules to accelerate both company’s plans for all-electric vehicles.
Compared with conventional batteries, the next-generation battery will deliver higher energy density, smaller packaging and faster charging capabilities for both companies’ future products, mainly for the North American market. Under the agreement, the companies will collaborate based on GM’s next generation battery system with the intent for Honda to source the battery modules from GM.
Drive motors Hitachi Automotive
Systems
On July 3, 2017, Hitachi Automotive Systems and Honda announced the establishment of a joint venture company for the development, manufacture and sales of motors for electric vehicles on the premises of Hitachi Automotive Systems in Hitachi city.
In the U.S., the company plans to establish a subsidiary in 2019 and start production of motors for the mass market in 2020.
Hydrogen fuel cell systems GM In January 2017, Honda and GM announced the establishment of a joint venture company, Cell System Manufacturing LLC, which will mass-produce advanced hydrogen fuel cell systems. The fuel cell system of the company will be installed on the products of both companies to be released in the future. Volume production is scheduled to start around 2020.

■Artificial Intelligence (AI)

Field Partner Descriptions
AI information security Boston
University
Honda aims to develop AI that cooperates with people. In order to achieve this, personal information about the users must be collected and analyzed. In order to protect the information, secure and reliable security technology is essential. A first research project will investigate data privacy control; using a technology called secure multi-party computation (one kind of cryptography). (Announced in May 2017)
AI that cooperates with people Kyoto University In addition to the art of production (mono-zukuri), Honda will take on new challenges in enhancing brand story creation about new value and experiences (Koto-zukuri). As part of its mobility initiative Honda aims to develop AI that cooperates with people. In collaboration with Kyoto University, Honda aims to establish a concept under which AI that collaborates with people will be broadly accepted and utilized in society. (Announced in April 2017)
AI that understands driver’s emotions SoftBank In July 2016 Honda R&D announced plans to collaborate with SoftBank and begin a joint research project toward application of the “emotion engine,” an artificial intelligence (AI) technology developed by “cocoro SB Corp.” (“cocoro SB”), a SoftBank Group company, for mobility products. Through this joint research project, Honda and SoftBank will strive to enable mobility products to utilize conversations with the driver, together with other information obtained from various sensors and cameras installed on the mobility product, both to perceive the emotions of the driver and to engage in dialogue with the driver based on the vehicle’s own emotions.

 

■Autonomous driving/Connectivity

Field Partner Descriptions
5th generation mobile communication system (5G) Softbank In November 2017 Honda R&D and SoftBank began discussions toward a joint research project to strengthen connected car technologies which will offer new experiences and value by connecting mobility products, primarily cars, and various other things. The two companies will pursue this joint research with a view to the future adoption of 5th generation mobile communication system (“5G”) standards.
Automated driving Waymo In December 2016, Honda R&D began studying the feasibility of a joint research project in the field of automated driving technology with Waymo, the automated driving research and development subsidiary of Google's parent company Alphabet Inc. The technical teams of both companies would install Waymo's self-driving technology such as sensors, software and in-vehicle computers on Honda vehicles and jointly conduct public road testing experiments in the U.S.
By collaborating with Waymo for the practical application of fully automated driving technology, Honda would be able to add to the knowledge it has acquired in the development of automated driving technologies to explore different technological approaches to bring fully self-driving technology to market.

Source: Honda press releases, media reports



Promoting a broad range of partnerships in China for electrification and autonomous driving

 Honda is actively pursuing tie-ups with Chinese IT companies and the localization of electrified car parts production while utilizing the aforementioned new technologies developed in Japan and the United States.

Electric mobility: By 2020 in China, Honda will introduce more than 20 new electrified vehicles.

At the Beijing Motor Show 2018, Honda announced that it will introduce more than 20 new electrified models in China by 2025.

 At the Beijing Motor Show 2018, Honda also announced its Honda “Everus” EV Concept for the joint development of China-specific compact SUVs and sedans with Guangqi Honda. The EVs will be developed based on the Vezel crossover SUV to be launched in 2018 under the brand “Everus”, its own brand for Guangqi Honda. Honda will first release EVs, receiving many credit points under the China NEV regulations, with plans to then introduce PHVs around 2020 (the Clarity PHEV will be introduced first).

 This volume production EV will also be used as a shared EV through the car sharing service of Reachstar, a car sharing company in China that Honda invested in last year.

Dongfeng Honda brand EV is scheduled to be released in 2019.

 With regards to hybrid vehicles, Honda released the CR-V HV from Dongfeng Honda in 2017, and in 2018 Guangqi Honda will release the Acura CDX and Accord HVs. All 3 models are equipped with a i-MMD dual motor system. Although hybrid vehicles are not counted under the Chinese NEV regulations, they effectively comply with the Corporate Average Fuel Consumption (CAFC) regulations implemented concurrently with the NEV regulation. Automakers are requested to achieve 5L/100km in 2020. And according to the long-term China Manufacturing 2025 (Made in China 2025) plan announced in 2015 to strengthen the Chinese manufacturing industry, the plan is requesting that automakers achieve a fuel consumption target of 4L/100km in 2025.

理念EVコンセプト CR-V
"Honda Everus EV Concept" to be released from Guangqi Honda in 2018 (Beijing Motor Show 2018) Honda released the new CR-V in 2017 as well an HV variant (Shanghai Motor Show 2017)

Collaboration with the Neusoft Group on electrification technology, and the localization of components such as batteries

Honda has partnered with Neusoft Reach, a major IT company in China, in areas such as the core technologies of electrified vehicles, AI, and big data processing.

Honda invested in Reachstar, a subsidiary of Neusoft Reach, and is collaborating with them in the car sharing business. By 2020, the companies plan to develop car sharing services using EVs in 80 cities in China.

In addition, Honda will promote the local production of hybrid systems, the local procurement of drive batteries, and the local production of motors jointly with Hitachi Automotive Systems.

Local production of hybrid system (E-CVT):

Honda China announced in September 2018 that it will localize production of the i-MMD hybrid system (E-CVT) that the company has been importing from Japan. The system will be manufactured at Honda Auto Parts Manufacturing Co., Ltd., an automobile powertrain production subsidiary in China launched in March 2017; and equipped on Honda vehicles beginning with the Accord HV that will be released in the latter half of 2018.

Local procurement of drive batteries:

For EV batteries, Honda will develop a battery to be installed in the Honda Fit class of compact EVs to be released in the first half of 2020 in partnership with the world's largest battery maker, Contemporary Amperex Technology, Ltd. (CATL). CATL already has plans to establish a sales base in Japan as well as a research and development department.

 Honda’s HV batteries are currently procured from Panasonic and sent from Japan, but will soon switch to procure from the plant of Panasonic Automotive Energy Dalian Co., Ltd., which was constructed in Dalian, China. In March 2018, the company started volume production of prismatic lithium-ion batteries for automotive applications.

Local production of motors:

In July 2017, Honda and Hitachi Automotive Systems established Hitachi Automotive Electric Motor Systems (Ltd.) to develop, manufacture, and sell electric motors for automotive applications.

In November 2017, the company established a new company Hitachi Automotive Systems (Guangzhou) Co., Ltd. to develop, manufacture, and sell motors for electric vehicles in Guangzhou City, Guangdong Province, China. Production is scheduled to launch in FY 2020. For the time being, Hitachi will supply the motors to Honda, but is also aiming to obtain orders from other automakers.

Expanding partnerships for autonomous driving and connected cars

Participation in the Baidu Auto-Driving Association:

Honda is reportedly the first Japanese automaker in the Apollo Program of the autonomous driving technology development consortium being led by Baidu, China’s leading IT company (there has been no official announcement from Honda). The consortium provides an open source platform for each automaker to develop their own technologies using the AI-based autonomous driving system platform called Apollo that was developed by Baidu. About 100 companies including automakers such as Ford, Daimler, and BMW; as well as automotive component suppliers, ZF, Intel, and NVIDIA are participating in the Apollo project.

 Incidentally, the SoftBank subsidiary, SB Drive Corp., has tied up with Baidu Japan Inc., the Japanese subsidiary of Baidu, Inc., to tap into the Japanese self-driving bus market with the Apolong minibus equipped with the Apollo technology provided by Baidu. Under the agreement, 10 electric Apolong minibuses will be shipped to Japan by the beginning of 2019 to start technology demonstration experiments on Japanese public roads in the current fiscal year ending in March 2019.

SenseTime:

SenseTime Group Limited headquartered in Hong Kong excels at image recognition using deep learning, especially technology to recognize moving objects. Honda and SenseTime signed a five-year joint research and development contract in December 2017.

By combining SenseTime’s moving object recognition technologies with Honda’s AI algorithms for scene understanding, risk prediction and action planning, the two companies will develop highly-sophisticated automated driving technologies which will enable complex automated driving in urban areas.

Connected cars: Partnership with the Alibaba Group

Honda has partnered with AutoNavi, a giant navigation map provider under the Alibaba Group umbrella, to develop connected cars that are constantly connected to the Internet to receive various services such as providing traffic information. They plan to develop a service that lets drivers make payments via Alibaba’s online platform Alipay.

Honda and AutoNavi have partnered since 2015 on advanced, multipurpose car-navigation systems.

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Key word

Honda, China, Sibling car, Open Innovation, Waymo, Softbank, Baidu, CATL

<Automobile Industry Portal MarkLines>