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The Impact of COVID-19 on Honda

Summary

Despite being a large international company, Honda has incurred the negative consequences of the world pandemic to a large extent. First of all, the demand for cars has considerably decreased. Business Today reports: “Japan’s No. 3 automaker expects profit to sink to 200 billion yen ($1.89 billion) in the year to end-March 2021” (COVID-19 impact, 2020, para. 1). Therefore, weak sales have led to a low annual income for the company (COVID-19 impact, 2020). This fact may prevent successful development in the near future. All the operations of the business will be focused on mitigation of the economic impacts of COVID-19 instead of elaborating innovations and increasing the competitiveness in the market.

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The production of cars has been affected by the coronavirus pandemic as well. During the period of lockdowns, on the basis of safety considerations, employers could not sell and produce cars at all. In the context of present-day developments, the production of cars encounters serious ordeals. For instance, Hanada (2021, para. 1) highlights, “Honda said it would halt output at its British factory from Monday to Thursday next week due to COVID-19 related global supply chain issues, the latest production suspension in recent weeks”. The reason for it is the shortage of materials, which are essential for creating their product. Honda lacks semiconductors as an automaker and chips as an electronic maker (Hanada, 2021). This fact prevents the company from achieving the prepandemic level of sales and recovering from the negative consequences of coronavirus comprehensively. In addition, there is a likelihood of bankruptcy, as the operation of the automobile plants has been affected by the pandemic’s negative consequences twice unless an appropriate recovery strategy is not implemented.

Recovery

In order to mitigate the impact of the world pandemic, Honda has adhered to appropriate measures. It is essential to mark that it has made essential efforts to maintain the safety of its clients and provide as many important services as it is possible. On the Honda site, it is stated: “in the case of recovery if the local Honda dealer is not open or the local body repairer (in the case of accident damage) then the car will be recovered to the customer’s home address (Corovanirus (Covid-19) update, 2021, para. 16). Moreover, during the lockdown, a network dealer was intended to fulfill the urgent needs of Honda’s clients (Corovanirus (Covid-19) update, 2021). The company also stated that it intended to support customers’ Honda Finance agreements and maintain their management. Such measures are helpful in maintaining the loyalty of the customers and contributed to demand recovery in the long run, which is one of the priorities for this business.

As it has been mentioned above, currently, Honda encounters a global shortage of semiconductor chips, which are necessary for creating its products. Therefore, it is not capable of producing cars in the same amounts as it was before the pandemic. In order to minimize the losses, the company has restricted the working time of its plant in the United Kingdom recently (Greenwood, 2021). This way, the plant is intended to operate only three days a week. Greenwood claims that a significant number of automakers, such as VW, Nissan, and GM, have to stick to the same strategy. Although this action is not beneficial for overcoming the consequence of coronavirus in the long run, it may contribute to saving vital resources and preventing total bankruptcy.

References

‘COVID-19 impact: Honda projects 68% dip in annual profits’ (2020) Business Today. Web.

‘Corovanirus (Covid-19) update’ (2021) Honda. Web.

Greenwood, L. (2021) ‘Global business daily: U.S. sanctions Nord Stream, Honda’s UK closure’, CGTN. Web.

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Hanada, R. (2021) ‘Honda cuts car production on massive chip shortage’, Nikkei Asia. Web.

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StudyCorgi. (2022, July 8). The Impact of COVID-19 on Honda. Retrieved from https://studycorgi.com/the-impact-of-covid-19-on-honda/

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