In a speech spelling out the future direction that the company will take, including its plans for electrification, Honda CEO Takahiro Hachigo has announced a new model programme which will reduce the total number of trim and option variants of global models to one-third by 2025 compared to now.
The automaker will increase efficiency by eliminating and consolidating some similar regional models into “even more competent models shared across multiple regions”.
The company’s current five global models, Civic, Accord, CR-V, Fit/Jazz and Vezel/HR-V, currently account for 60% of global sales while regional models such as the N Series for Japan, Pilot for North America and Crider for China are driving growth in each region.
“We recognise the number of models and variations at the trim and option level have increased and our efficiency has declined,” Hachigo said.
“So, we will undertake initiatives to further strengthen our inter-regional coordination and collaboration and evolution of vehicle development in order to simultaneously increase the attractiveness and efficiency of both global and regional models.”
The company adopted a new operational structure for its automobile unit from April and began reviewing and sharing the product line by grouping some of its six regions outside Japan based on a similarity of key factors, such as market needs and environmental regulations.
It has also introduced the so-called Honda Architecture in new product development to increase the efficiency of development and expand parts-sharing for mass-production models.
The first model being developed with this new method will be a “global model” launching next year [expected to be the redesigned Fit/Jazz just announced for a Tokyo motor show reveal later this year].
“We will continue increasing the number of models to which we apply this new architecture,” Hachigo said. He’s also promised a much better hybrid system for the new Fit/Jazz compared with previous models.
“We will expand the application of our i-MMD2 2-motor hybrid system to the entire lineup of Honda vehicles. In addition to the i-MMD hybrid system which is compatible with mid-to-large-sized vehicles, we developed a new, more compact i-MMD hybrid system suitable for small-sized vehicles. This small-sized i-MMD hybrid system will be adopted first by the [redesigned] Fit which we are planning to exhibit as a world premiere at the Tokyo motor show this autumn.
“In addition to the expansion of the lineup of products equipped with i-MMD, we also will expand the application of i-MMD on a global basis. With that, by 2022, we are expecting to reduce the cost of the i-MMD system by 25% compared to the cost of this system in 2018.”
Strengthening global and regional models through inter-regional coordination and collaboration and with the Honda Architecture, by 2025, Honda expects to reduce the number of development man-hours used for development of mass-production models by 30% and will “repurpose those manhours to accelerate our research and development in advanced areas for the future”.
“We are making steady progress in optimising our production capacity in all regions. When this is complete, we are expecting to see that our global capacity utilisation rate, excluding China, will increase from 90% in 2018 and we will be producing at full capacity by 2022.
“In China, the third plant of Dongfeng Honda became newly operational, and this put us in a position where we can definitely accommodate market demand in China. We believe that this progress we made paved the way for the optimisation of our global production capacity,” Hachigo said.
It was important to increase competitiveness and production efficiency in North America.
“For our business in North America, while keeping pace with sales expansion, we enhanced our model lineup and established a flexible production system where our plants sometimes produce various models in duplication to accommodate changes in market demand,” the CEO said.
“However, as a result of the pursuit of high flexibility, an increase in the investment amount and a decline in production efficiency started to become an issue. Therefore, in North America as well, we will reduce the number of variations at the trim and option level, and at the same time, we will simplify the production model allocation at each plant. Through this initiative, we will re-establish a highly-efficient production system and realise the growth of North American business through the pursuit of quality.
“By implementing these initiatives to increase production efficiency in each region, we are expecting to reduce global cost in the area of production by 10% by 2025, compared to the cost recorded in 2018.
“Through all these initiatives I have mentioned, we will steadily strengthen the structure of our automobile business and realize the solidification of our existing automobile businesses by 2025, and, at the same time, we will accelerate our preparation for the future.”
Hachigo said Honda wanted to electrify two-thirds of its global automobile sales by 2030.
“When we talk about the introduction of electrified vehicles, there are two perspectives. One is the improvement of fuel economy, and the other is zero emissions. Regulations for the Corporate Average Fuel Economy (CAFE) standards are becoming increasingly stringent in every country around the world and complying with CAFE standards is one of the most important challenges for the automobile industry.
“In light of the required infrastructure and how people use automobiles, we believe that hybrid technology is, at this moment, the most effective way for us to comply with CAFE standards. Therefore, we will electrify our products mainly with hybrid technologies.”
“As for zero emission vehicles, with our battery EVs we will comply with the Zero Emission Vehicle (ZEV) program being adopted by California and other states in the US and China’s New Energy Vehicle (NEV) mandate. We will efficiently introduce our battery EVs to the market by selecting the most appropriate partners and resources to satisfy the different needs in each region.
“In North America, we will jointly develop battery components with General Motors and introduce highly-competitive battery EVs in the market.
In China, in order to keep up with the fast speed of electrification, we have already begun introducing battery EV models developed together with our local joint venture companies in China. While envisioning the introduction of battery EV models from the Honda brand, we will continue utilising local resources in China and introduce more battery EV models in a timely manner to fulfill local market needs.”
Hachigo confirmed Honda’s new battery EV for Europe and Japan, recently introduced as a prototype at the Geneva show, would be called simply the ‘e’.
“Honda will ‘popularise’ and improve the business feasibility of electrified vehicles by focusing on hybrid vehicles and battery EVs,” he said.