Honda considering decoupling supply chain from China -Sankei

TOKYO, Aug 24 (Reuters) – Honda Motor Co Ltd (7267.T) is considering building a separate supply chain that would reduce its dependence on China, the Sankei newspaper reported on Wednesday, in what would be a high profile move by a major Japanese manufacturer.

Many big Japanese companies have built extensive production hubs in China but have recently seen output snarled by COVID-19-related lockdowns. There are also deepening worries about the impact of tensions between the United States and China.

Nearly 40% of Honda’s automobile production took place in China in the last financial year.

Honda would continue to keep its supply chain in China for the domestic market in the world’s second-largest economy, while building a separate one for markets outside of China, the Sankei said. It did not say where it got the information.

A Honda spokesperson said the Sankei report is not something announced by the company, adding it has been working on reviewing and risk-hedging its supply chain in general.

“The review of the supply chain from China and risk hedging are elements that need to be considered, but it is not quite the same as the objective of decoupling,” the spokesperson said.

The government had previously offered companies incentives to bring production back to Japan, although uptake appeared to be subdued, with some executives and analysts saying it would be difficult for Japan Inc to suddenly move away from a market where it had steadily built production and logistics hubs.

Nevertheless, some of companies have already sought to reduce dependence on China following strict COVID-19 lockdowns in Shanghai.

Another Japanese automaker Mazda Motor Corp (7261.T) said this month it would ask its parts suppliers to increase stockpiles in Japan and produce components outside China, after the lockdowns destabilised supply, forcing it to shut down domestic production for 11 days in April and May. read more

Mazda said it would seek to include higher domestic inventories and diversification of production outside China when forming contracts with suppliers for designing new models in the long term.

Reporting by Satoshi Sugiyama and David Dolan; editing by Jason Neely and Tomasz Janowski