Japanese automaker Honda Motor has announced that it has reached an agreement with Chinese state-owned automaker Guangzhou Automobile Group Company to extend the term of their vehicle production and sales joint venture, GAC Honda Automobile Company Ltd (GAC Honda), through to 2038.

Honda holds 50% of the shares in GAC Honda, including 40% held directly and 10% held by its wholly-owned subsidiary Honda Motor (China) Investment Company Ltd, while Guangzhou Automobile Group owns the remaining 50% of the equity. The joint venture was established in 1998, with production at its first vehicle production line in Guangzhou beginning in early 1999.

While cumulative production at GAC Honda has exceeded 11 million units since operations first began, the joint venture has failed to keep pace with China’s rapid transition to new energy vehicles (NEVs) in recent years. Sales plunged by 53% to 64,150 units in the first half of 2026.

Honda said in a statement: “Today, China has grown into the world's largest automobile market in volume, where competition continues to intensify amid the rapid advancement of electrification and intelligent technologies. By fully leveraging the respective technologies and resources of Honda and GAC Group, and continuing to offer products that meet the diverse needs of customers, Honda will further strengthen its automobile business in China.”

Honda is understood to be planning to restructure its operations in China, which also include a joint venture in Wuhan with Dongfeng Motor Group, called Dongfeng Honda Automobile Company. The two joint ventures have a combined production capacity of 1.2 million vehicles, split between six vehicle assembly plants.

According to local reports earlier this year, the company is considering stopping internal combustion engine (ICE) vehicle production at GAC Honda and closing down an ICE plant, while stepping up efforts to produce battery electric vehicles (BEVs) for the local and overseas markets.