Honda is taking cues from Apple’s supply chain management style to boost EV production capacity by directly engaging with suppliers and ensuring the availability of components, with a focus on batteries and chips.
The automaker aims to enhance supply chain management, deeply involving itself in the development and production process to ensure quality while controlling costs. The first example of this partnership is with TSMC, with whom Honda has announced a collaboration to develop EV chips, and next, batteries.
Batteries are critical to EVs and vital for increasing production capacity. Honda announced a collaboration with Japanese battery manufacturer GS Yuasa this week, investing JPY 434.1 billion in the development and mass production of lithium batteries for EVs. The Japanese government will subsidize approximately 30% of the investment to ensure the battery supply chain remains in Japan.
Launching in October 2027, the battery plant will boast an annual capacity of 20 GWh, enough to supply hundreds of thousands of EVs. The plant will serve as the foundation for Honda’s accelerated electrification strategy, which aims to achieve 100% EV sales in China by 2035—five years ahead of schedule.
To meet this goal, Honda aims to establish a new supply chain structure—emulating the iPhone’s close monitoring of quality and cost from component sources—to support its upcoming EV lineup. The automaker plans to bypass a traditional pyramid and supply chain structure by communicating directly with suppliers, eliminating the need for Tier 1 and Tier 2 intermediaries, and forging direct connections with component suppliers.
While not applicable to all vehicle components, Honda exhibits a clear shift in supply chain strategy for batteries, motors, and chips. Honda is partnering directly with TSMC for chips; for batteries, it’s GS Yuasa. Additionally, the company is increasing its stake in drive supplier Hitachi Astemo from 33% to 40%, aiming to lead component development and the manufacturing process.
Honda attributes declining profits to recent supply chain issues and is implementing a bold new structure for its EV business to maximize profits. However, some executives argue that the primary reason for profit decline is the slow transition to EVs, which has caused more damage than chip shortages.
Honda already revised its sales forecast twice during the first quarter of 2023, with sales in one of its main markets, China, falling 38% compared to the same period last year.
(Image Source: Honda)