Starting Power Products Business in China
with the Introduction of Generators Ahead of Competitors

In 1994, Honda established Fujian Honda Mindong Generator Co., Ltd (Mindong-Honda), a joint venture with Mindong Electric Co., Ltd. (Group). This was the first joint venture established in China by a Japanese generator manufacturer. China was experiencing rapid economic development, and sudden power outages were frequent due to the tight power supply. The reform and the open-door policy led to a rapid increase in the number of privately owned businesses and stores, and generators were needed as emergency power sources for restaurants, food stores and other businesses.
Initially, Honda was exporting generators as complete units from Japan, however, in response to the high demand, Honda decided to locally produce and sell generators in China, as the second category of products following motorcycles.
In 1995, Mindong-Honda began production of generator components such as alternators, control panels and frames, and then assembly of complete generators.
In 2002, Jialing-Honda began production of the GX160 general-purpose engine, utilizing engine production capacity and technology amassed through motorcycle production. The local production of engines enabled Honda to reduce cost and accommodate growing demand in the market. Subsequently, Jialing-Honda began to take on the production of complete power products such as lawnmowers and pumps, in addition to engines.
Although Jialing-Honda had been producing both motorcycles and power products, in 2005, the company made the decision to discontinue its motorcycle production and concentrate on power products business.
As the foreign ownership ratio for power products business is not restricted by the Chinese government's industrial policy, as is the case of motorcycle and automobile businesses, Honda increased its stake in Jialing-Honda from 50% to 70% when the company shifted completely to power products business, building a structure that allows for stronger representation of the Honda way of thinking to grow the business.

Jialing-Honda was transformed from a motorcycle production operation to a power products production operation.

Mindong-Honda was established to accommodate the growing need for generators in China.
First joint venture of a Japanese generator manufacturer in China

Generators produced at Mindong Honda.

The GX160 general-purpose engine

Always Putting the Customer First:
Honda Provides After-sales Services at its Dealership
Locations

In conducting its power products business in China, Honda won the hearts of its customers not only with the high quality of its products, but also with high quality services.
Considering the vastness of China, Mindong-Honda did not rely solely on the general sales channel through wholesalers, but through trial and error, created a sales network that suited local characteristics and expanded its market share. In addition, the company provided a traveling inspection service at its dealerships. Associates from Mindong-Honda visited each dealership to inspect and repair products that had been delivered to its customers. For example, generators, the main product of Mindong-Honda, were purchased primarily as a backup power source, and many customers stored it for long time with little use. As a result, some of the generators were unable to start due to old gasoline fuel clogging the carburetors. By repairing such products at the dealership, Mindong-Honda was able to share repair techniques and know-how with its dealers. In addition, much was gained from making users happy while getting a chance to hear customers’ honest opinions.
Meanwhile, Jialing-Honda also undertook a number of initiatives to establish superior service. Like Mindong-Honda, the company provided after-sales service at its dealerships and, in 2005, conducted the first service management training program in the power products business in China, focusing on human resource development.
Dealers were appreciative, commenting on how Jialing-Honda associates often visited their dealerships and provided guidance even for parts replacement, while other manufacturers would only send products.
These efforts were initiated by the desire of Honda to take root in and contribute to the local community, and have continued to the present day. Both Mindong-Honda and Jialing-Honda, have shared with their local associates the basic Honda approach of always putting the customer first.

Dramatically Increasing Production Capacity
with State-of-the-Art Plant

As Jialing-Honda transitioned to specializing in power products, the company explored the optimal way to establish its production operation. The production facility of the company, which was producing motorcycles, was not optimal for power products production. The installation of dedicated power products production lines was essential to increase production volume in line with expanding market share.
However, Chongqing, where Jialing-Honda was located, was undergoing an increase in population along with urbanization, and the number of residences and schools were also increasing, making it difficult to expand the scale of operations at the existing factory. Jialing-Honda made a decision to relocate its factory.
The new plant site was located in a mountain, 40 km away from the existing plant. In addition to the need to coordinate with more than 30 Chinese manufacturers, the remoteness of the site caused headaches for the factory construction project team, as power cables had to be laid from 10 km away, over a mountain, just to supply electricity.
Liu Bingfeng, former director of Administration at Jialing-Honda said: “Even if the building was completed first, the plant could not operate without electricity, so we watched the transmission towers being erected one by one and adjusted the building construction plan based on our estimation of how long it would take for the electricity to reach the plant.”
After four years of construction, the new plant began operations in November 2011. The site area was approximately twice that of the old plant. In addition to specialized equipment for power products production, a highly efficient production line that could handle everything from aluminum casting to machining, assembly, and shipping was completed, enabling an annual production capacity of 900,000 units. Furthermore, based on the concept of “the most favorable plant in the region where associates can be proud and happy to work,” advanced environmental measures were implemented. This included the introduction of a solar power generation system and the recycling of rain and wastewater, making the state-of-the-art plant both environmentally responsible and an easy place to work. With a greatly increased production capacity, Jialing-Honda became to assume an important role as a global supply base, exporting its products to 95 countries around the world.

Ceremony to mark the completion of the new Jialing Honda plant.

Developing the Domestic Market Through Direct Sales to
Retail Distributors

The GP160H general-purpose engine.

The cultivation of the domestic market was an important theme in the power products business in China. The product development capabilities of Honda and its approach of being deeply rooted in the local community played a major role in this area.
Despite Honda GX Series general-purpose engines having an established reputation worldwide, they were slightly too expensive to achieve widespread use in China. For example, even for tillers, which were in high demand in China, the price of the GX-powered FJ500 was a hurdle that prevented it from penetrating the market. The sales channel, through trading companies with their margins, was also a factor in high prices.
To address this issue, Honda developed two, reasonably-priced and reliable GP Series general-purpose engines for emerging markets, the GP160H and GP200H, both introduced in 2013.
One factor that enabled Jialing-Honda to realize low prices for the series without compromising Honda standards for reliability, was the company's efforts to cultivate local parts suppliers in Chongqing. As a result, it had become possible to procure parts of sufficient quality at low prices, without having to rely solely on Japanese parts manufacturers.
Another significant factor was eliminating trading company margins by developing a direct sales channel to retail distributors, rather than through wholesale trading companies. Jialing-Honda sales associates visited major retail outlets throughout China to convey the appeal of the products and give demonstrations, and through other persistent sales activities, developed a direct supply route to these retail outlets.
This sales style was also applied to product development. When relying on wholesale trading companies, the customer voice did not reach Jialing-Honda, and it was difficult to gain direct feedback and requests from the market. After switching to direct sales to authorized retailers, Honda was able to receive customer feedback. The product planning team members for the GP Series engines were happy to receive requests for product improvements and hints about what kind of products customers desired, which gave them insight into how to approach the market in the future.
In 2015, Jialing-Honda launched the FQ650, a GP engine-powered tiller, for 2,900 yuan, which was a price low enough to compete with locally-made models. In 2011, when the FJ500 was the only model available, annual sales were around 300 units, but in 2018, three years after the FQ650 was launched, combined sales of the two models had grown to around 2,500 units per year. The number of authorized distributors also exceeded 100. The development of the domestic market and product penetration were steadily progressing through determined activities.

Electrification Helps Honda Serve People
With the Joy of Expanding Their Life’s Potential

As its power products business was growing in China, Honda made some organizational changes. In January 2017, Mindong-Honda was merged into Jialing-Honda to streamline the business and strengthen the sales network. In 2020, Honda purchased its Chinese partner’s stake to become the sole owner and renamed the company Honda Power Products (China) Co., Ltd. (Honda Power). In 2021, cumulative production of Honda power products in China reached 15 million units, and general-purpose engines and complete power products were exported to more than 100 countries around the world, making China, along with Thailand, a global base for Honda power products business.
January 2023 marked the 30th anniversary of the establishment of Jialing-Honda, the predecessor of Honda Power. Since entering the Chinese market, Honda had developed products that support various aspects of people’s daily lives such as general-purpose engines, lawnmowers, tillers, and generators. Now, Honda power products business took a new step forward in its efforts to achieve carbon neutrality by 2050. At its 30th anniversary ceremony, Keisuke Tsuruzono, then general manager of Honda Power, said:
“We are committed to serving our customers with ‘the joy of expanding their life’s potential through our high-quality power products, including new electrified products.”
Honda Power is further enhancing its lineup of electrified power products, which started with the launch of its first electric hand-held power products (such as portable brush cutters and chainsaws) in China in December 2022,.

First Step into the Chinese Automobile Market Turned Out
to be a Bitter Experience

Honda began its move to enter the Chinese automobile market immediately after the reform and open-door policy was announced in 1978. However, it did not proceed as smoothly as motorcycle business, which steadily developed its market and local production. In fact, the first move became a bitter experience.
In 1979, Honda exported 100 units Accord to the Guangzhou Taxi Company under a two-year collaboration agreement with Dah Chong Hong Limited based in Hong Kong. This was also an attempt to study and research automobile use and the infrastructure environment in China, with a view to entering the market in earnest in the future.
After two years, however, the joint business was terminated, and Honda recovered multiple units of Accord used in China to conduct analysis in Japan, revealing that the suspensions were fatigued from driving on rough roads and oil was leaking from the dampers. Engine parts, especially the camshafts, were severely worn, and the crude gasoline and engine oil had continuously scraped the surfaces of the cams. Honda R&D was so shocked by the results that it told the sales division not to export any more vehicles to China.

A Drop in the Ocean:
Entering the Market with an Accord Featuring China-Exclusive
Specifications for Added Toughness

China's gradual transition to a market economy led to a pronounced increase in agricultural, industrial, and commercial productivity, and foreign investment was becoming increasingly active. More and more joint ventures with foreign capital were being established, and rising demand for company and official cars was difficult to satisfy with available domestic products in China. To further attract foreign investment in automobile imports, which had previously been strictly regulated, the Chinese government provided incentives to foreign companies and joint ventures to purchase vehicles duty-free within a quota based on their investment.
Honda felt the right time had arrived. In reviewing its policy of not exporting automobiles to China, Honda drew on the experience it had gained from exporting the Accord and decided to develop a model featuring specifications developed exclusively for the Chinese market that could handle rough roads and inconsistent gasoline quality. The Accord, once again, was chosen as the first model to undergo this customization for China. The engine and suspensions were modified to be more durable. Leather seats, sunroof, power windows, and other features were included to meet the needs of official and corporate vehicles.
In 1987, Honda began exporting Accord to China. Although sales increased year over year, the challenge was after-sales service. At the time, Honda exported vehicles based on contracts with trading companies designated by the Chinese government, and these companies were not capable of servicing cars. Honda then decided to build its own service network, setting up sales and service representatives in Beijing, Shanghai, and Guangzhou to sell the cars and take care of customers. Honda established HASS (Honda Authorized Service Stations) to service the imported vehicles, and also linked HASS with importers for service parts. The sales, service, and parts supply departments worked in unison to provide support so that customers could drive Honda cars with peace of mind, thanks to reliable technology and genuine parts.
Through efforts to expand vehicle sales and after-sales service, Honda increased its name recognition and reputation for reliability in China, and the highly-regarded Accord formed the Honda brand image as luxurious, modern, and high-quality. This was the springboard for the Guangzhou project, and for obtaining approval for the four-in-one sales and service network.
The introduction of the Chinese Accord and the development of HASS were just a drop in the ocean; nonetheless, it served as the starting point of the challenges Honda took on to enter the Chinese automobile market.

The Chinese Accord was developed based on the Accord for the North European market.

Breaking Through the Narrow Entry Point, yet Got Stalled
at the First Step of Three-Step Business Expansion Straegy

The Chinese government positioned the automobile industry a one of key national industries, and in order to increase its international competitiveness, instituted a policy to consolidate the 120 or so automobile companies scattered throughout the country into eight companies: three to produce large vehicles, three to produce small vehicles, and two to produce small (light) vehicles.
Foreign investment was limited to joint ventures, with the investment ratio capped at 50%, and the maximum number of joint ventures by the same foreign investor was limited to two, effectively requiring foreign investors to enter one of the eight Chinese manufacturers as a partner.
Honda was presented with an opportunity to break through this narrow gateway into the Chinese automobile market. In 1994, Honda was asked by the authorities to become a partner of Dongfeng Motor Corporation, one of the three automobile companies created to produce large-size automobiles.
Koji Kadowaki, former Chief Representative of the Beijing Office of Honda, said: “The know-how Honda had amassed through motorcycle and power products businesses became the foundation for Honda business development in China. In light of changes in the policies of the Chinese government, Honda determined that the time was ripe to launch our automobile business."
Honda accepted the offer and established Dongfeng Honda Auto Parts Co., Ltd. (Dongfeng Honda Parts) in December 1994. The Chinese government policy was to earn foreign currency through the production and export of parts to contribute to China's automobile industry and economic development as the first step, and to eventually grant new licenses to produce complete vehicles to companies that were also successful in engine production, and export as the second step. Honda and Dongfeng Motor had drawn up a three-step business expansion strategy that, after these two steps, would proceed to the production and sale of complete vehicles.
However, this business expansion strategy came to a standstill when the government changed its policy, and Dongfeng Honda Parts was denied approval to produce engines. Nevertheless, Dongfeng Honda Parts refused to give up on its dream of someday producing complete vehicles in China and continued to produce and export auto parts to Honda operations in Asia.

Dongfeng Honda Parts