Guangzhou Automobile Group (GAC) Honda Automobiles will let go seven per cent of its 13,000-strong workforce. That means, Honda’s joint venture in China will terminate the contracts of at least 900 workers, rendering them jobless as it is now shifting focus towards electric vehicles.
The contracts are being discontinued because production has fallen. Compensation will be provided to the contract workers who quit early in this first ever layoff round by Honda in 25 years since its joint venture with GAC began in 1998.
Till October of 2023, GAC Honda had sold only about 4.9 lakh units, recording an 18.5 per cent dip in year-on-year sales. Most of the units were sold in the US and not China, which once accounted for 30 per cent of the total sales. In China, the sales dropped by nearly one fifth of the sales recorded during the same time last year.
The slump in the traditional auto-manufacturing space can be attributed to the growing demand for electric vehicles.
Hundreds of workers had been laid off by General Motors this year when its plants were affected by the United Auto Workers (UAW) strike. Ford and Stellantis too had laid off hundreds of workers at their plants during the first-ever labour action against the Detroit three automakers.
Very recently, high costs and low productivity caused Volkswagen brand to be declared financially incompetitive. The parent company, VW Group — which owns Audi, Porsche and the original Volkswagen brand — is shifting focus to producing electric cars.
