Ultraman draws his power from the light of the Land of Light, relying on that energy to battle monsters.
When Honda first entered China, it carried a similar halo—a technological edge forged in the internal combustion engine era: mature engines, reliability, and fuel efficiency. In 2020, Honda's sales in China surged past 1.627 million units. Models like the Accord, CR-V, and Civic were consistent bestsellers, moving over 10,000 units a month, with demand often outstripping supply.
Yet light inevitably fades, and old sources are eventually replaced by new ones.
As domestic new-energy brands rise rapidly, Honda's traditional ICE advantages have eroded. Compounded by a sluggish electrification pivot, its market share is under immense pressure. In the first half of 2026, Honda's cumulative sales in China totaled just 206,000 units. GAC Honda sold fewer than 70,000 units, while June sales alone plummeted 53%. The overall market share for Japanese brands has retreated from 22.6% in 2021 to 12%, with Honda suffering the most severe blow among the top Japanese automakers.
Even so, Honda isn't ready to abandon China. In July, the automaker renewed its joint venture with GAC, extending the partnership through 2038. The move sends a clear signal: Honda is staying. But having chosen to remain, where will its new light come from?
Five Years of Losing Ground on ICE
Six years ago, Honda was riding high in China. In 2020, terminal sales hit 1.63 million units, with classics like the Accord, CR-V, and Civic permanent fixtures in the “10,000-unit club.” By 2025, however, annual sales had slumped to fewer than 650,000 units—a 60% contraction from its peak.
Honda's success in China over the past two decades was built on a mature competitive logic rooted in the ICE era. Back then, consumers judged cars by engine technology, mechanical reliability, fuel economy, and long-term ownership costs—areas where Japanese automakers, Honda included, excelled.
Models like the Accord, CR-V, and Civic established a solid foundation on that landscape. Official 2020 data shows all three surpassed 200,000 annual sales, while the XR-V reached 160,000. At its peak, the CR-V consistently sold over 20,000 units a month, the Accord held firm in the first tier of mid-size sedans, and the Civic regularly moved more than 20,000 units monthly.
Until 2023, Honda's ability to maintain million-unit sales for years relied heavily on this winning combination: technical reputation, product stability, and consumer trust.
But the rules of the game have shifted over the past two years. In the new-energy era, battery efficiency, smart cockpits, driver-assistance capabilities, and continuous software iteration have become the core considerations for buyers. Honda's mastery of mechanical performance is no longer a decisive competitive edge—it has become merely the industry baseline.
Take the 100,000 to 200,000 yuan market. Once the most secure stronghold for joint ventures, it has been breached by domestic brands leveraging new-energy tech. These rivals now lead in space, configuration, intelligent features, and operating costs. A growing number of young consumers no longer prioritize durability and fuel savings alone; they expect their vehicles to function as smart terminals capable of continuous upgrades. This is the root cause of the pressure on Honda's ICE lineup.
The market shift is visible in the performance of flagship models. Data from Gasgoo shows that in the first half of 2026, the Accord's average monthly retail volume fell to around 5,000 units. CR-V sales shrank by nearly half compared to their peak, while the Civic's monthly sales stabilized at just 2,000 units. Former blockbusters like the Fit, XR-V, and UR-V managed only a thousand or so units during the same period.
Honda has relied on heavy discounts at the dealership level to prop up sales, offering short-term relief for inventory pressure. But when everyone is slashing prices, this strategy yields diminishing returns—and it cannot halt the downward slide.
The decline of the ICE market isn't unique to Honda; the entire joint venture camp faces similar headwinds. The difference lies in how some automakers have managed to unlock new growth through electrification. Honda, meanwhile, has yet to build an effective successor to its ICE-dominated empire.
Among the top three Japanese automakers, Toyota has proven the most resilient. It sold roughly 700,000 new vehicles in China from January to June, a 17% year-on-year drop and its first first-half decline in two years. Yet its sales volume remains more than double that of Honda and Nissan combined.
Electrification Fails to Offset ICE Decline
For Honda, the real pressure is that its new-energy business has failed to generate enough growth to offset the decline in internal combustion engines. While shrinking ICE sales are a common challenge for all traditional automakers, the ability to pivot to electrification determines who survives the systemic switch.
In fact, Honda was an early mover in electrification. While most joint ventures were still talking strategy, it rolled out the e:N series of EVs and the Ye brand, executing concrete plans. Around 2022, it launched e:N models in China (introduced first by Dongfeng Honda). GAC Honda followed with the “Ye” brand in 2024, releasing its first pure EV model early last year.
Unfortunately, both new-energy brands have underperformed in the terminal market. Data from the first half of 2026 shows that the e:N, e:NS2, Ye P7, and Ye S7 were the relatively strong performers, yet none broke 10,000 units in sales. The P7 led with 5,800 units in the first half, while the other three hovered around 4,000. By contrast, rivals like BYD and Geely are selling over 100,000 new-energy vehicles a month.
Honda's brand premium from the ICE era has not carried over to the new-energy market. In China, consumer demands have shifted from basic transportation to intelligent, digital experiences. The multi-year product cycles of the ICE era are obsolete; the new battle is fought over product definition, autonomous driving capabilities, OTA update speeds, and local supply chain integration.
Honda's R&D has long focused on refining mechanical hardware, leaving it with insufficient reserves in software development—a gap it is now trying to fill through partnerships. Its pure EVs retain Honda's manufacturing quality, but intelligent features and infotainment design still follow a global standard. This lack of localized optimization has created a noticeable gap in smart experience compared with domestic leaders.
Hybrid models currently on sale, Source: Honda China
Furthermore, the competitive advantage of Honda's signature i-MMD hybrid technology is eroding. Once a core differentiator, the system has seen slow updates. With domestic technologies like BYD's DM, Geely's Raytheon, and Great Wall's Hi4 now in mass production, hybrid power has shifted from an exclusive selling point to a standard industry configuration, steadily diluting Honda's technological moat.
Plug-in hybrid models currently on sale, Source: Honda China
Whether in oil-electric or plug-in hybrids, Honda's i-MMD has failed to deliver its expected impact. In the ICE space, Honda arrived later than Toyota, missing the first-mover advantage. In the new-energy space, Honda has focused primarily on pure EVs, offering only the Inspire as a plug-in hybrid in China. Yet in the mass market between 100,000 and 250,000 yuan, plug-in hybrids (including range-extended models) are the primary force driving new-energy adoption and replacing gasoline cars.
Honda hasn't abandoned the Chinese new-energy race; it is tapping local supply chains and planning a next generation of products. But the domestic market structure has largely solidified, with local brands completing full product matrices. Honda faces the dual challenge of closing the technology gap and winning back consumer mindshare. Its core imperative now is building a new operational system tailored to the logic of Chinese new-energy competition.
Organizational Mismatch with the Times
The deeper conflict behind Honda's struggles in the new-energy era lies in the misalignment between its long-standing organizational structure and global decision-making processes, and the new demands of electrification and intelligence.
Over the past decades, Honda grew into a global powerhouse using a mature ICE industrial system. Long-term technical accumulation, standardized quality control, and unified global development processes formed the core competitiveness of Japanese automakers in the fuel era.
When industry rhythms were slow and global consumer demand converged, this system offered clear efficiency advantages. Models were thoroughly verified before market release, ensuring stability, while unified global standards spread R&D costs and maximized scale.
Entering the electrification cycle, the logic of competition has been fundamentally rewritten—especially in hyper-competitive China. The industry focus has shifted from powertrain manufacturing to the speed of capturing user needs, dynamically adjusting products, and iterating technology. This places new demands on organizational flexibility.
The root cause of Honda's lackluster EV competitiveness and fading technical edge is that its traditional global development and decision-making systems cannot adapt to the high-speed iteration of China's new-energy market. Domestic consumers demand rapid updates to smart cockpits, driver assistance, and infotainment, requiring automakers to optimize products and upgrade experiences based on immediate market feedback.
Yet Honda's centralized global operations model means demands from China must navigate layers of approval. The decision chain is long and implementation efficiency is low, making it difficult to keep pace with local iteration speeds.
Xia Feng, a researcher at a domestic automaker (using a pseudonym), argues that the core dilemma for joint ventures is a structural mismatch between the mature systems of the ICE era and the competitive rules of the new-energy market.
Source: Honda China
This systemic misalignment is not unique to China; it is a universal challenge for Honda's global electrification. In March 2026, Honda announced a retrenchment of its North American electrification plans, freezing an EV and battery plant project in Canada and halting development on three core EV models. As a key profit center and strategic priority for electrification, a strategic pullback in North America signals broader headwinds for Honda's global EV layout.
Honda is aware of this. In China, it has pushed for localization reform, relaxing R&D authority for its Chinese team, integrating with local supply chains, and accelerating the transition to electrification and intelligence.
Yet the inertia of a deeply entrenched global system is formidable. Localized reforms are struggling to show quick results. As the elimination race in the new-energy industry accelerates, the time window for Honda to adapt to China's new rules and complete its systemic overhaul is rapidly closing.
Honda Must Prove Its Worth in China Again
To reverse its fortunes, Honda is pushing targeted localized reforms. On the product front, it is expanding its hybrid and pure EV portfolios to plug gaps in its new-energy lineup. On the channel front, leveraging the GAC joint venture extension to 2038, it aims to optimize terminal operations and better align with local consumer demands.
Source: Honda China
With its North American EV projects stalled and global transition under pressure, Honda may elevate the strategic importance of its Chinese base. Currently, Dongfeng Honda's e:NS2 is being exported to Japan under the INSIGHT name, with an initial limited run of 3,000 units. China's manufacturing base has the potential to upgrade into a global export hub for Honda's electrification strategy, providing broader support for its global transition.
However, Honda's localization breakthrough must navigate the structural constraints of the joint venture model. Industry expert Zhong Shi notes that the domestic market has fully shifted to the new-energy track. Most traditional joint ventures are trapped in a dilemma due to lagging transitions: increasing R&D specifically for China raises costs that cannot be amortized globally, while underinvestment leaves them unable to compete with fast-rising domestic brands.
Clearly, Honda has chosen the first path for now. Guided by its four-wheel business restructuring and future strategy released in 2025, it is accelerating EV launches, using local supply chains to close the intelligence gap, and optimizing capacity to boost operational efficiency. Going forward, Honda's core task will not simply be expanding its EV lineup, but overhauling the product development logic inherited from the ICE era.
But the outcome of these reforms hinges on the strength of product execution and systemic overhaul. If new products can align with local user needs—addressing shortcomings in intelligence and pricing—Honda can still rely on its manufacturing heritage and existing user base to hold its ground in the mainstream market. If it settles for superficial electrification or persists in old-school development thinking, its market share in China will likely continue to wither, forcing a retreat into niche segments.
Source: Dongfeng Honda
Honda's predicament is a microcosm of the shifting joint venture era. Its rise in China was deeply tied to the boom in internal combustion vehicles, relying on mature mechanical technology, consistent quality, and brand reputation to maintain a leading position among mainstream joint ventures.
Today, the rapid ascent of new energy has fundamentally rewritten the rules of competition. The industry's focus has pivoted from mechanical prowess to battery technology, intelligent experience, software iteration, and systemic responsiveness.
As Zhong Shi observes, the turnover of core industry elements has completely reshaped the automotive landscape. For Honda, the central challenge is not merely staying in China, but adapting to these new industrial rules and re-establishing its market value.
Conclusion:
When Ultraman loses the native energy of the Land of Light, the key to continuing the fight lies in finding a new source of power. In the series, that light often comes from humans—Ultraman does not battle alone.
Honda, in the throes of transition, faces a similar predicament. As the competitive advantages of the ICE era wane, stabilizing its market position requires finding a new energy source suited to the new-energy track. China's complete new-energy supply chain is the new light within reach. Batteries, electric drivetrains, smart cockpits, driver assistance—China has built the world's most complete new-energy industrial ecosystem, capable of providing integrated technology and supply chain support.
Joint venture brands like Volkswagen and Nissan are already leveraging local supply chains to iterate products and support their global operations; Honda has begun similar attempts. Renewing its partnership with GAC answers the question of whether Honda will stay in China. But whether it can shine again depends on the market performance of its upcoming products.
The new light is right in front of it. Whether Honda can seize the opportunity is entirely up to the company itself.
