It’s safe to say that Honda is in a bit of a pickle. It recently canceled two of its own electric vehicles, the 0 SUV and 0 Sedan, along with the Acura RSX revival. It will book up to $15.8 billion in losses, and that’s not all. The two Afeela-badged EVs it had been developing with Sony are also dead on arrival. It’s an alarming sign of how some traditional automakers are struggling to create a profitable business case for electric cars.

But the issues go deeper than just EVs. As with most long-running nameplates, Honda is having a hard time remaining competitive in China. Sales have collapsed in just a few years, from a peak of 1.62 million in 2020 to only 640,000 units in 2025. Only about half of its manufacturing footprint is being utilized, well below the 70–80 percent typically needed in the automotive industry to turn a profit. For 2026, annual output is projected to drop below 600,000 units.

Honda CEO and President Toshihiro Mibe recently traveled to China to gain insight into how domestic companies are churning out so many products in such a short timeframe. After visiting an auto supplier factory in Shanghai, he made a stark remark: “We have no chance against this,” Nikkei Asia reports.

You might have heard about “China Speed” and how local automakers can develop a brand-new model in two years or less. By comparison, legacy brands often need twice as long, and sometimes even more, to engineer a new product. With an astronomical number of companies developing vehicles at a record pace, it’s no wonder it feels like China is launching a new car every other day.

Chinese suppliers are not only able to match this pace but also do so with cost efficiency that the industry’s biggest names can only dream of. Mibe’s statement shouldn’t be seen as an admission of defeat, however. Upon returning from China, Honda’s CEO told suppliers, “We must act quickly” to accelerate development.

To that end, Honda is restoring its independent R&D division by relocating thousands of engineers to a newly established engineering subsidiary. It is expected to operate with greater autonomy than in the past six years, when development was centralized, and headquarters called the shots. Whether this added creative freedom will turn things around remains unclear, though it’s reasonable to assume that major decisions will still be made at HQ.

Honda’s leadership isn’t alone in sounding the alarm across the supply chain. In an October 2025 interview with CBS Sunday Morning, Ford CEO Jim Farley didn’t mince words either:

‘They have enough [production] capacity in China with existing factories to serve the entire North American market, put us all out of business.’

Similarly, former Toyota CEO Koji Sato recently told suppliers during a meeting with representatives from 484 companies that unless things change, the company’s very existence could be at risk:

‘Unless things change, we will not survive. I want everyone to acknowledge this sense of crisis.’

When Toyota, the world’s largest carmaker for the sixth consecutive year, makes such statements, the gravity of the situation is unmistakable. China has become an automotive juggernaut and a force to be reckoned with, not just within its borders but across global markets.

Take Europe, for example, where BYD has a 1.8 percent share of total sales through the first two months of the year. According to registration data published by the European Automobile Manufacturers’ Association (ACEA), SAIC stands at a Nissan-matching 1.9 percent, well ahead of Honda at just 0.5 percent through February.

Motor1’s Take: Honda is the latest major automaker to warn about the severity of the situation. China is developing and building cars at a pace and cost unmatched by the rest of the industry. Long-established companies must adapt to survive, whether independently or by partnering with Chinese automakers. Either way, legacy players need to rethink their modus operandi to avoid being overtaken by China’s rapid rise.