Catching an Early Wave of Reform
and Entering the Motorcycle Business in China
At the end of 1978, a shift to the reform and open-door policy led by Deng Xiaoping was announced in China, opening the doors to the market that had long been closed to the world. In January 1979, an industrial delegation from China visited Honda and, at the request of Jialing Machinery Factory (currently, Jialing Industry Co., Ltd. (Group), a motorcycle manufacturer in Chongqing, Honda signed a technical collaboration agreement with in 1981.
Production of the JH50 moped model began in 1982, marking the company's entry into the huge Chinese market ahead of its global competitors and, in 1985, Honda signed a large contract with Jialing to build an engine production facility, establishing local production infrastructure for motorcycles.
At about the same time, Honda also began technical collaboration with companies in Shanghai, Guangzhou and Luoyang. At the time, there were not so many motorcycles in use in China, and they were not technologically advanced. Honda motorcycles were so sophisticated and durable that the company quickly gained the unwavering trust of Chinese customers.
The next step was for Honda to produce its own motorcycles locally. However, even with the trust gained through the technical collaboration, progress toward local production was slow. At the time, the Chinese government considered motorcycle business to be a key industry for China's economic development and did not allow foreign capital to enter the market independently. To realize local production, establishment of a joint venture with a local manufacturer was necessary, and there were restrictions on the ratio of capital contribution, which could not exceed 50%. On the other hand, a joint venture had its advantages. By forming a partnership with a local manufacturer, Honda would be able to gain Chinese business know-how, and take initiatives rooted in the local market.
The contract signing with Jialing Machinery Factory.
From 1992 to 1993, Honda entered into a series of joint venture agreements with local manufacturers in Guangzhou, Tianjin and Chongqing and established three motorcycle production and sales joint venture companies: Wuyang-Honda Motorcycle (Guangzhou) Co., Ltd. (Wuyang-Honda), Tianjin Honda Motorcycle Co., Ltd. (Tianjin-Honda) and Jialing Honda Motors Co., Ltd. (Jialing-Honda).
Wuyang-Honda initially decided to use the factory of its joint venture partner, motorcycle manufacturer Guangzhou Motors Group Company, as its first production facility. However, Honda representatives were astonished when they saw the factory, where stamping, welding, and assembly were performed separately in different buildings. The first step in remodeling the factory was to connect the buildings with conveyor belts.
Similarly, the offices were divided into many rooms, and since it was difficult to see what each other was doing, walls were removed to create an open environment. Although gaining the understanding of the Chinese associates was difficult, as they had their own preferences, changes to the factory and office were made according to The Honda Way. As words alone were insufficient to understand Honda corporate culture, Chinese associates were often taken on tours to Honda factories in Japan to promote a better understanding.
Yang Dadong, former Wuyang-Honda Chairman said, “Department leaders visited the Kumamoto Factory, the head office, and Honda R&D facilities many times to learn about Honda production methods and philosophies. They then shared what they learned with others back in China, and through discussion, created the Wuyang-Honda culture over a period of three years.”
Wuyang Honda, the first joint venture company Honda established with a Chinese partner.
Chinese Policy Changes and a Flood of Counterfeit
Motorcycles Lead to Dark Ages
After overcoming the initial difficulties of entry into the market, Honda motorcycle business through local joint venture companies grew strong in both production and sales operations.
Masaru Hakuto, former Tianjin-Honda General Manager said: “We felt that the day when all the motorcycles on the streets of Tianjin would be replaced by those made by Tianjin-Honda was no longer just a dream.”
Honda motorcycle sales in China, however, declined rapidly in the late 1990s. In 1994, the Chinese government's new policy for the automobile industry led to the consolidation of motorcycle manufacturers into groups of major companies, as was the case with automobile manufacturers, and small, local manufacturers rapidly expanded their production capacity to survive. This caused extremely low-priced products to flood the market. Many of these products were counterfeits of Honda products.
This was further exacerbated by restrictions on license plates in urban areas. In the late 1990s, urban areas began restricting the issuance of license plates to reduce the number of motorcycles, citing chaos caused by traffic congestion, emissions, and the impact on the aesthetics of the city.
Honda motorcycle joint ventures focused on promoting domestic production. In an effort to further improve the competitiveness of quality, cost and delivery, they procured the same parts from multiple suppliers, which led to a rapid increase in the number of suppliers. However, the sluggish demand for motorcycles led to a situation in which excess parts flooded the market, and counterfeit manufacturers emerged to assemble these components into complete vehicles and sell them on the market.
Low cost counterfeits were no match for the quality and performance of original Honda motorcycles. However, compared to the prices of motorcycles made by joint ventures of Japanese motorcycle brands at the time, ranging from 200,000 to 300,000 yen, counterfeit products were sold for 70,000-100,000 yen. Many customers were attracted by the low prices, which were less than half the price of the genuine product, and purchased the counterfeit products knowing they would risk the product breaking. Urban residents, who made up the majority of Honda customers, were unable to obtain new license plates due to regulations, while cheaper counterfeits were getting popular in rural areas. As soon as Honda could develop a new model, it was quickly copied by local manufacturers.
Yasuo Ikenoya, former deputy general manager of Honda Regional Operations (China) at the time said: “There was no hope that we could recover the investment we made. It was truly a dark period. In the end, Wuyang-Honda stopped investing and developing new models, for about four years.”
In the late 1990s, some of the many counterfeiters grew in terms of production volume to challenge joint ventures of Japanese brands. As a result of these local manufacturers expanding their market share with low prices and a wide range of products, China grew to become the world's largest motorcycle market and producer at the time.
Reverse Thinking: Partnering with a Counterfeiter
Honda faced a predicament and found a way forward with a bold strategy of utilizing those counterfeiters. It was truly a case of reverse thinking.
In 1999, Honda received an offer to form a joint venture from a local manufacturer, Hainan Sundiro Holding Co., Ltd. (Sundiro), which was one of the counterfeiters which grew big, producing 600,000 units of counterfeit products, including a copy of Honda CG125, and selling them for about half the price of genuine Honda models. It was, by all accounts, the enemy of Honda. However, Honda had taken notice of Sundiro‘s business method, which Honda did not have.
Sundiro was committed to speedy procurement of inexpensive parts and had built a parts procurement system for this purpose. Using an information network spanning throughout China, the company tallied daily sales figures for each model and collected information on parts prices from various manufacturers. When purchasing parts, suppliers would bid on the basis of the quantity and delivery date. In addition to this parts procurement system, its two factories in Shanghai and Hainan as well as a China-wide sales network were of great value. In addition, some of the parts used by Sundiro were not only inexpensive, but also had quality that met Honda standards. In other words, by replacing sub-par parts with genuine Honda components, it was possible to make products that could be accepted as Honda products while significantly reducing costs.
Up to this point, Honda partners in motorcycle business in China were state- and city-owned enterprises, but Sundiro was a privately owned company. Honda believed that the owner-president, who had foresight and flexibility, could make decisions quickly and share Honda values throughout his privately owned company.
Sundiro also saw benefits in teaming up with Honda, believing that China's accession to the WTO would intensify competition with foreign companies, and that there was no guarantee that it could survive as a counterfeiter.
As a joint venture of privately owned two companies, Sundiro Honda strived to conduct business with speedy management decisions.
Creating a System Enabling Local R&D Through Production
In 2000, Sundiro, Tianjin Motors Group Inc., and Honda signed a joint venture agreement. Tianjin-Honda and the motorcycle business division of Sundiro joined forces to establish a new motorcycle manufacturing and sales joint venture, Sundiro Honda Motorcycle Co., Ltd. (Sundiro Honda).
Honda already had a lineup of models which were highly regarded as advanced, high-quality, mid- to high-end motorcycles. The establishment of Sundiro Honda created a structure to meet a broad range of market needs by combining Tianjin-Honda, which had advanced engine manufacturing technology and produced and sold models in the mid- to high-end price range, and Sundiro, which had excellent market analysis, sales, and procurement capabilities and offered many products in the mid- to low-end price range.
In 2002, Honda established Honda Motorcycle R&D China Co., Ltd. (HRCh), a motorcycle research center, in Shanghai. This was the first fully foreign-owned research center established in China by a Japanese motorcycle manufacturer. HRCh began operation in 2003, and the first model HRCh was involved in the development was the 125 cc e-Sai, introduced by Sundiro Honda in 2024. Based on the user survey conducted jointly with Sundiro Honda to gauge local requirements, HRCh created a unique, sporty exterior design. The e-Sai also had excellent environmental performance, complying with China's Stage II emissions standards.
By establishing a fast and highly efficient system for local R&D and production ahead of other motorcycle manufacturers, Honda was able to respond quickly to market changes and offer products that were tailored to local needs.
HRCh became the first motorcycle research center in China established by a Japanese motorcycle company.
125 cc Scooter e-Sai was developed to reflect local needs.
Growing into a Global Motorcycle Business Operation
by Producing Good Products at Lower Cost
The Today was researched and developed in Japan and manufactured in China under strict quality control.
In 2000, Hiroyuki Yoshino, then president of Honda, announced the “Made By Global Honda” strategy, which consisted of utilizing its cost-competitive overseas production operations in India and China, and optimizing procurement and production on a global scale through the Honda global network that had been built up to that point.
Motorcycles produced in China were being exported to Africa, Central and South America, and the Middle East, taking advantage of the country’s cost competitiveness. Yoshino went further, declaring that new models for Japan priced under 100,000 yen would be produced in China and imported into Japan. Although sales of 50 cc Class-1 category models were declining in Japan, potential demand was expected given the number of licenses obtained in that category, and market research showed that there was a growing preference for lower priced Class-1 models. In response to this need, the Today scooter was imported into Japan from China for the first time in 2002.
While research and development of Today was conducted in Japan, parts procurement and production was based in China. Experts from various divisions of Honda in Japan traveled to China to team up with Sundiro staff. The top priority was to achieve a price of less than 100,000 yen while pursuing quality and performance. Sundiro played a key role in selecting parts suppliers with the best quality, cost and delivery from more than 200 suppliers, and project members traveled all over the country, from Dalian in the north to Hainan Island in the south. At first, many of the parts did not meet Honda standards, but through persistent requests for improvements, the team narrowed down the list of suppliers that could produce parts that met Honda requirements.
In December 2001, development was completed, and the project moved into the production phase at newly-established Sundiro Honda. For the establishment of Sundiro Honda, a team from Honda Kumamoto Factory was sent to Sundiro Honda to provide guidance on production work processes and Honda-style production methods.
The concept of quality at the level acceptable by Honda was shared, and work standards to achieve that level of quality were introduced to improve the work environment to enable efficient work, and a strict quality assurance system was put in place. After confirming the mass production setup, Sundiro Honda began production of the Today model with the full support of Honda.
The new Today, priced at 94,800 yen, went on sale in Japan in August 2002 and sold well, with cumulative exports to Japan exceeded 100,000 units in June 2003.
Taking advantage of this experience, Honda began exporting a number of motorcycle models from China to Japan. Wuyang-Honda began production of the Spacy 100 in 2003, and Sundiro Honda began production of the Dio and Dio Cesta scooters in 2003 and 2004, respectively, which were exported to Japan.
The Today production line at Sundiro Honda.
The Spacy 100 became the second model, following the Today, to be imported into Japan from China.
In 2012, all-new Super Cub 110 and Super Cub 50 full model change models, were produced and exported by Sundiro Honda.
The Super Cub 50 had been a timeless classic since 1958, but this was the first full model change that included the introduction of a completely new frame structure. Behind the decision to produce these all-new models in China was the Honda desire to make Super Cub models affordable for even a wider range of customers. As a result of the efforts to streamline everything from procurement to production, Honda was able to lower the selling price in Japan, including consumption tax, by 21,000 yen for the Super Cub 110 and 48,300 yen for the Super Cub 50 compared to the previous models.
The motorcycle business in China evolved into a production base that plays an important role in the Honda global network.
The Super Cub 110 produced at Sundiro Honda in China and exported to Japan
Electric Motorcycles, the New Everyday Mobility
Electric two-wheelers*2 had become a popular and convenient means of transportation in China, replacing conventional motorcycles that were banned in urban areas based on restriction to the issuance of license plates. In particular, the popularity of electric bicycles (EBs) had exploded, as they were less expensive, required no rider’s license, and were easier to ride as they provided access to bicycle lanes.
The popularity of EBs had exploded, as they were cheaper, required no rider’s license, and were easier to ride as they provided access to bicycle lanes.
In 2011, Honda began production and sales of its EB model, the Kushi, which featured a maximum speed of 20 km/h and a range of 40 km on a single charge. The price was 2,700 yuan, or approximately 30,000 Japanese yen at the time.
The Kushi was developed locally in China in only eight months after conducting thorough market research of more than 2,000 people on how they used bicycles in their daily lives.
By using components already available in China, with some specifications and design changes, Kushi was introduced as a product that met local needs by combining an affordable price with safety features as a Honda product without compromise.
Demand for electric two-wheelers in China continued to rise steadily, and by the beginning of the 2020s, the total number of electric two-wheeler ownership reached 300 million units. In 2021, Wuyang-Honda launched two scooter-type electric models, the U-GO and U-be, both locally developed.
The U-GO was available in two types with different motor outputs, competitively priced at 7,999 yuan (around 145,000 yen at the exchange rate in 2021) for the 1.2 kW model and 7,499 yuan (around 135,900 yen) for the 800W model. The U-GO had many practical features including helmet storage, a USB charging port, front hooks and a front storage compartment.
The single-seater U-be weighed only 54 kg, with a low seat height and short wheelbase for easy handling. Priced at 3,099 yuan (approximately 56,000 yen, at the exchange rate in 2021) for the base model, the U-be was made affordable by keeping the configuration as simple as possible.
In 2022, Sundiro Honda introduced the MS01, an EB resulting from a collaboration between Honda and Ryohin Keikaku Co., Ltd. (Muji), a household and consumer goods retailer. The MS01 was designed by Muji (Shanghai) Commercial Co.’s design team, and developed, produced, and sold by Sundiro Honda. The uniquely refined Muji monotone design was combined with Honda technological strengths. This model went on sale in a limited quantity of 5,000 units in China at 4,980 yuan (around 100,000 yen), which was a high price for the Chinese market.
- In China, Honda categorizes electric two-wheelers into three categories by top speed: Electric bicycle (EB): up to 25 km/h, Electric moped (EM): 26 - 50 km/h, Electric Vehicle (EV): 51 km/h and above.
Electric two-wheelers have become popular in China as a convenient means of transportation. Wuyang-Honda locally developed and sold two models, the U-GO and U-be.
