Nissan and Honda are getting beat in China by local EV makers and may cut back

Nissan reportedly plans to begin discussions with a local joint venture company to cut its production by as much as 30%, or about 500,000 cars per year. Across its eight factories in China — including two operated through a joint venture with Dongfeng Motor, one of China’s “big four” state-owned carmakers — Nissan makes about 1.6 million cars annually. In 2018, Nissan and Dongfeng announced a $9.5 billion investment plan that included introducing 20 new models in China.

Last year, the Yokohama-based automaker saw its output drop 24% compared to 2022, falling below the 1 million mark for the first time in 14 years, the Nikkei reported. The company reportedly plans on devoting some of its plants to exporting products elsewhere in Asia.

Honda $HMC Motor Co. plans to cut production capacity by as much as 20% to around 1.2 million vehicles yearly and has already told major suppliers it will be slashing capacity, according to the Nikkei. The Tokyo-based company has a total capacity of 1.49 million vehicles through its joint ventures with the GAC Group and Dongfeng.

Last month, Eiji Fujimura, Honda’s chief financial officer, told investors that 1.2 million units of production “is the appropriate level.” Honda has previously said it aims to introduce 10 Honda-branded EV models by 2027 in China and make all sales in the nation EVs by 2035.

Japanese automakers have struggled to maintain their footing in China; Honda’s and Nissan’s sales have been falling for the past several years — although Toyota $TM Motor’s sales have remained largely flat — and Mitsubishi Motors has pulled all production there.

Meanwhile, Chinese companies are increasingly launching new EVs on the market, slashing prices and pressuring foreign automakers to match their state-subsidized low price tags.

Representatives for Nissan and Honda Motor Co. did not immediately respond to requests for comment.