According to a report in the Sankei newspaper on Wednesday, Honda Motor Co. Ltd. is thinking about creating a different supply chain to lessen its reliance on China. This would be a highly visible move by a significant Japanese manufacturer.

Large-scale production hubs for many large Japanese companies have been established in China, but recent COVID-19-related lockdowns have slowed down output. Concerns about the effects of the tensions between the United States and China are also growing.

In the most recent fiscal year, Honda produced nearly 40% of its vehicles in China.

According to the Sankei, Honda would maintain its supply chain in China for the domestic market in the second-largest economy in the world while constructing a different one for markets outside of China. It made no mention of where the data came from.

According to a Honda spokesperson, the company has not made any announcements regarding the Sankei report, but it has been examining and risk-hedging its supply chain as a whole.

“The review of the supply chain from China and risk hedging are elements that need to be considered, but it is not quite the same as the objective of decoupling,” the spokesperson said.

Bonuses to move production back to Japan had earlier been offered by the government, but interest in them seemed muted. Some executives and analysts even claimed that it would be difficult for Japan Inc. to abruptly leave a market where it had slowly established production and logistics hubs.

Nevertheless, some businesses have already made an effort to lessen their reliance on China in the wake of Shanghai’s strict COVID-19 lockdowns.

After the supply was disrupted by the lockdowns and forced it to shut down domestic production for 11 days in April and May, another Japanese automaker, Mazda Motor Corp, announced this month that it would ask its parts suppliers to increase stockpiles in Japan and produce components outside of China.

Mazda stated that when creating contracts with suppliers for long-term new model development, it would try to include higher domestic inventories and a diversification of production outside of China.

(Adapted from SeekingAlpha.com)

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