Honda Motor will move several thousand engineers working on automotive development into a separate R&D entity from 1 April, reviving Honda R&D as an independent unit, Nikkei Asia reported.
Honda R&D was originally spun out in 1960. The structure reflected founder Soichiro Honda’s belief that engineers are more creative when operating with greater freedom.
Under the earlier model, the subsidiary carried out research commissioned and financed by Honda Motor. It then sold the completed designs back to the parent company.
The engineer-led set-up, largely insulated from business-led decisions, was credited with supporting major advances. In 1972, it produced the low-emission CVCC engine, the first to meet US emissions rules.
The Civic fitted with the CVCC engine sold strongly in the US. That success helped underpin Honda’s wider expansion in four-wheel vehicles.
Honda shifted away from this approach in 2020. Then-president Takahiro Hachigo judged that developing everything in-house was slowing execution and hurting the car business.
Despite internal objections, Hachigo brought the R&D arm back under Honda Motor. The goal was efficiency-focused management linking product planning, development and mass production.
Current president Toshihiro Mibe, then head of Honda R&D, supported that change. He said "bold reforms were necessary for survival."
Mibe has now reversed course and opted to restore the unit’s independence. "Five or six years ago, it was fine to have headquarters taking the lead," said a Honda executive.
The report said this shift comes as Chinese rivals gain ground on cost, speed and factory automation. Honda is facing pressure to respond as competition intensifies in China.
"We have no chance against this," Mibe said during a late-February visit to a supplier plant in Shanghai. He described a production floor with no human workers due to automation.
The Chinese parts maker also supplies Tesla, according to the report.
Nikkei Asia said Chinese automakers can develop a new model in about 18 to 24 months. That is roughly half the timeframe typically needed by Japanese manufacturers.
Honda’s sales in China have continued to decline. New vehicle sales in 2025 fell 24% from 2024 to 640,000 units, marking a fifth straight year of contraction.
Toyota’s sales in China rose in 2025 for the first time in four years, the report said. Nissan’s sales fell 6%, a smaller drop than its 12% decline in 2024.
Honda postponed the 2025 China launch of a flagship EV under a new local EV brand. It concluded the model would not reach its sales targets.
In February, Honda informed Chinese parts suppliers that its 2026 production plan was for under 600,000 units. "It's an extremely disappointing plan," said a parts company executive.
China previously drove earnings growth for Honda, with sales peaking at about 1.6 million units in 2020. By 2025, sales had fallen to 640,000 units.
Honda’s production capacity in China is about 1.2 million units. Factory utilisation is around 50% to 60%, below the 70% to 80% commonly seen as break-even.
The earlier absorption of R&D improved development efficiency, including simpler internal processes, the report said. Honda now wants the development unit to regain stronger authority.
"We must act quickly" to digitalize production, Mibe told Japanese parts suppliers in early March. Honda is aiming to match Chinese rivals’ speed and software capabilities.
Toshihiro Akiwa will become president of Honda R&D in April.
A Honda executive said, "Even if we restore the research institute, there is no guarantee that we can beat China." The executive added, "But that doesn't mean we're going to raise the white flag here."
Honda is also positioning India as a key base to lift competitiveness. It plans to build the 0 Alpha global strategic EV in India for release in 2027, selling it in Japan and elsewhere.
