Breaking news! The first major crash of 2026 has occurred, with 700 billion disappearing overnight.

Author | Frontier Industrial Research Institute, Industry Observation Team

In March 2026, the global auto industry was struck by a thunderclap.

Honda, a supergiant that has ruled the global automotive stage for half a century, had its performance blow up!

The Shattering of the Old Order

Honda Motor Co., Ltd. officially released a 2025 fiscal year performance revision notice, announcing that it would record an impairment loss of $15.7 billion related to its electrification transformation assets, and that the net loss attributable to shareholders of the parent company was expected to reach ¥420 billion to ¥690 billion (about RMB 18.2 billion to 29.8 billion).

This is a devastating blow for the Japanese automaker giant that has been racing the world since listing in 1950 on the strength of its superb internal combustion engine technology—its first annual loss, bringing an end to the 76-year profit myth.

Once, Honda’s VTEC engines went global under the banner of “the pinnacle of high-revving naturally aspirated power,” becoming a performance totem in the hearts of countless car enthusiasts. Behind the joke of “buy an engine and get a car,” lies the market’s ultimate recognition of its mechanical manufacturing strength.

Now, this era-defining technical glory it used to be proud of has faded in the face of the cold, loss numbers in the financial report—descending from the altar.

But more lethal than the loss figures is a “retreat statement” accompanying it:

Honda officially confirmed that it will completely cancel three core electric SUV models originally planned to go into mass production in 2027–2028. These three models were originally Honda’s key chips in its plan to build a high-end electric market in North America. The prototype models debuted in a high-profile manner at the International Consumer Electronics Show in Las Vegas in January 2025, but now they have become “collateral” for a strategic adjustment.

The reason is simple: up to now, Honda’s pure-electric lineup has not established a sustainable, profitable business model.

In the past, supported by subsidies, Honda could still put on a show in the North American market. But in September 2025, the U.S. federal government canceled the $7,500 tax credit policy for electric vehicles. On top of that, with massive losses brought about by changes in tariff policy, Honda’s electrification plans in North America have completely lost their profitability support.

This is not just a blot on financial statements—it is a strategic “castration” of the future by Japanese automakers in the North American market, where profits are most abundant and where they were once firmly in control.

The signal it sends is clear and brutal: the “Macedonian defense line” Japanese cars built over half a century in the internal combustion engine era—centered on lean production and reliable, long-lasting durability—is crumbling before our eyes.

Losing the core profit pool will trigger a terrifying chain reaction.

A gap in R&D spending will further widen the technological lead difference; meanwhile, technological backwardness will cause market share to bleed even faster, eroding precious cash flow and forming a deadly spiral of “loss—contraction—falling further behind—bigger losses.”

Honda’s $15.7 billion loss can be seen as an extremely painful one-time “buyout fee” paid to say goodbye to the old era.

Yet after paying, whether it can successfully push its way through the door to the new era remains unknown.

More ironic still, Honda internally is undergoing a change that reverses the natural order.

In spring 2026, the Japanese domestic market officially begins pre-sales and deliveries of GAC Honda and Dongfeng Honda’s pure-electric models. Among them, Dongfeng Honda’s model Hunter Light e:NS2 lands in Japan under the name “INSIGHT,” with a limited sale of 3,000 units. GAC Honda’s e:NP2 model also enters Japan’s market at the same time—signaling that Japan’s domestic market is starting to receive in large quantities Honda pure-electric models produced in China.

This scene is like a slap across the face of Japan’s auto industry:

In the past, Japan was the “home port” of global auto technology, while the Chinese market was the profit source for Japanese technology, production lines, and core components. Going forward, when Japanese consumers buy Honda electric cars, most of the money will flow back to R&D offices located in China, as well as upstream suppliers such as batteries, chassis, and systems.

What’s more, the Southeast Asian market—once the “backyard garden” of Japanese automakers for more than half a century—is also being ruthlessly penetrated by China’s auto industry.

At its peak, Japanese brands held market shares of over 90% in countries like Thailand and Indonesia. But in 2026, their market shares in countries including Thailand and Indonesia fell below 65%, and the rule built on decades has collapsed.

In sharp contrast, Chinese automakers led by BYD, Changan, Great Wall, Chery, and SAIC are seeing multi-point growth across the Southeast Asian market. In Thailand, pure-electric models saw a 354% surge in January; among the top five in sales, Chinese brands took 4 seats. BYD became the fourth-place brand on Indonesia’s January sales chart with a market share of 7.3%. In Malaysia, the Proton e.MAS 5 (China Geely Xingyue overseas version) leads the pure-electric ranking with 3,276 units.

The loss of Southeast Asia means the final strategic buffer zone of Japan’s auto industry is disappearing.

A Japanese auto industry front line spanning North America, the domestic market, and Southeast Asia shows a pattern of total collapse this spring in 2026.

Big trends in the world run relentlessly: those who follow prosper, while those who resist perish. The shifting balance between China and Japan’s auto industries today, at its core, is the replacement of the era—China’s new-energy track displacing the traditional gasoline-car track.

Honda’s massive loss and retreat, and the comprehensive loosening of the Japanese automakers’ defenses, are the most prominent “splashes” in this irreversible industrial wave.

China’s Power Reshaping Global Industrial Chains

Behind Honda’s embarrassing performance is another number even more astonishing:

In 2025, China’s domestic retail penetration rate for new-energy vehicles officially surpassed 50%, and in December 2025 alone it pushed penetration to a peak of 56%.

That means for every 2 new cars sold, 1 is a new-energy vehicle.

With annual sales of 13.875 million new-energy vehicles, the scale has already exceeded the combined total of Europe and the United States, capturing more than 60% of the global new-energy market.

This is just “internal strength.” Once internal strength has been cultivated, it’s time to strike outward.

In 2025, China’s total vehicle exports reached 8.324 million units. It ranked first globally for three consecutive years. Of this, new-energy vehicle exports were 2.615 million units, up 100% year over year. Entering 2026, this momentum shows no sign of slowing: in the first two months, new-energy vehicle exports surged 120% year over year.

A more symbolic milestone is this: in 2025, total sales by China’s automakers first surpassed Japan’s automakers, ending the latter’s 25-year reign as the global powerhouse and taking the top spot in the world.

With a massive domestic demand market whose penetration rate is over half, plus an overseas fleet that topped sales, China’s auto industry is achieving a full-spectrum gap over the global industry ecosystem—in market perception, iteration speed, and global offensive capability.

And supporting all of this is a “net cast wide” across the entire domain—an all-domain vertical integration spanning from mineral resources to software ecosystems, from R&D cadence to cost control.

Upstream: Resources and Materials—Gripping the “Cost Lifeline” of the Industry

Real industrial warfare begins at mines and chemical plants. Through capital going abroad and technology deployment, China controls more than 70% of the world’s lithium-salt processing capacity. And by breaking out early in the next-generation materials system, lithium iron manganese phosphate (LMFP) and sodium-ion batteries have both achieved large-scale cell loading.

Midstream: R&D and Manufacturing—Defining “China Speed” for the Industry

Here, China has built a speed-and-efficiency system that traditional industrial giants can only look up to with awe. For example, the popularization of ultra-large integrated die-casting technology compresses the full R&D cycle of a new car to 18 months—about half the platform R&D cycle of Volkswagen and Toyota.

Downstream: Ecosystems and Recycling—Reshaping the “Ultimate Form” of the Industry

In defining the ultimate meaning of auto products, China has carried out a profound paradigm revolution. The world’s densest and smartest ultra-fast charging network has brought the charging experience close to the convenience of “refueling.” At the same time, a mature power battery recycling and utilization network ensures a closed-loop cycle of core resources.

After firmly controlling the entire industrial chain advantage from resources to recycling, the real deciding factor lies in leading breakthroughs at a few key technological “high ground” areas.

First is cross-generation domination at the cell level.

In 2025, China’s power battery companies accounted for 80% of global shipments, with market share far ahead. Japanese and Korean firms not only have smaller shares but their growth rates are also far slower than China’s automakers. Even Samsung SDI’s power battery loaded volume has shown a decline.

By 2026, China’s leading domestic companies’ all-solid-state batteries are approaching mass production. Energy density has exceeded 400Wh/kg, while overseas peers’ corresponding technology largely remains at the sample stage in laboratories.

The gap between large-scale production “ready products” and R&D prototypes indicates that the divide in industrialization capability is still widening.

There is also the “equal opportunity through higher-spec standards” at the architecture level.

According to China’s new-energy vehicle database QuestAuto, in December 2025 the share of L2-level advanced driving assistance configurations in markets across all price tiers reached 77.3%, up significantly from 64.3% at the beginning of the year. In the under-100,000-yuan price segment, the share grew from 17.4% to 37.8%, showing a clear trend toward “driving-assistance equality.”

This industrial phenomenon of “equal opportunity through higher-spec standards” is rooted in the pressure of market competition forcing the issue—companies must force the most advanced technologies into mainstream models at the fastest speed and with the most lethal cost. When international manufacturers are still negotiating back and forth with suppliers for delivery lead times measured in months, China’s industrial ecosystem can coordinate a supply chain in units of “days.”

Specifically, this advantage across the entire industrial chain is reflected in outbreaks of clusters across regions and across cities.

There just happens to be a city that is transforming—from yesterday’s “strategic rear” for Japanese joint ventures into today’s “innovation front” for homegrown brands to charge forward—providing an undeniable regional specimen for this contest between China and Japan’s industries and the handover of global power.

China’s Bridgehead of Counterattack

Chongqing was once a crucial “strategic rear” for Japanese cars in China. Joint ventures such as Changan Ford and Changan Suzuki cultivated deep roots here for decades.

But it is also on this land that, in 2026, a perfect snapshot of China’s “rail-switching and overtaking” in the auto industry is taking shape.

In 2025, Chongqing’s total auto production reached 2.788 million units, up 9.7%. After 9 years, it returned to the title of “China’s No. 1 auto city.” Among this, new-energy vehicle output surged at a year-over-year growth rate exceeding 150%, becoming a major engine of growth across the country. The local brand lineup “from Chongqing,” represented by Changan, Seres, and Deepal, achieved cluster-based, explosive growth on the new-energy track.

Chongqing’s transformation is not only a return of production numbers, but a full rebirth in the new intelligent and electrified auto track, built from several “hardcore moments”:

First, the “apex moment” of intelligent electrification reconstruction.

In December 2025, the country’s first officially issued special license plate for L3-level automated driving—“Yu AD0001Z”—was granted in Chongqing. To support this status, Chongqing carried out “saturation-style investment,” such as establishing the Jialing River Laboratory focusing on the underlying logic of “automotive robotics,” and turning the “8D” magical terrain into one of the most challenging automated-driving test sites in the world.

Second, the “resilient foundation” of ecosystem fusion and mutation.

Chongqing’s designed “33618” modern manufacturing cluster system formed a complete closed-loop cycle—from battery raw materials to intelligent terminals. In January 2026, Seres saw its 1 millionth vehicle roll off the line. Behind this are the coordinated transformation and upgrading of more than 1,000 local suppliers.

Third, the “channel revolution” of global resonance.

In May 2025, Changan Automobile’s Thailand plant officially began production. “Made in Chongqing” shifted from pure product trade to a new stage of integrated exports of “brand, manufacturing, and supply chain.” As the operational center for the Western Land-Sea New Corridor, Chongqing enabled “ship out, drive out to the customer—arrive to the sea” through logistics innovations such as “ASEAN fast班” services.

However, a stage-by-stage victory is by no means the endpoint.

To firmly establish Chongqing’s strategic position as China’s “counterattack vehicle,” it must conquer more strategic value “mountain tops” deep in the waters of global industrial competition.

The future deciding factors lie in precise positioning and extreme breakthroughs across several key sub-segments.

Recommendation 1: Break into automotive-grade power semiconductor “design” and control the current gate of an 800V platform.

Chongqing should establish a special industrial攻坚 fund. Through methods such as “posting the project and appointing the team,” it should attract top SiC design teams to set up in the region. Co-build joint design and verification laboratories with local top universities and leading enterprises, achieving breakthroughs in autonomous design capability for high-end automotive SiC chips.

Recommendation 2: Build a “research and manufacturing mother port” for “globally right-hand-drive versions” of new-energy vehicles, striking directly at the interior of Japan’s right-hand-drive Southeast Asian strongholds.

Chongqing, with its cross-border logistics strategic advantages of the Western Land-Sea New Corridor, can, led by the government, partner with full vehicle makers such as Changan and Seres. From product definition and the start of R&D, it should conduct deep customization and development for right-hand-drive markets including Southeast Asia, Australia and New Zealand, and the UK.

Recommendation 3: Plan across the entire domain a green closed loop for power battery recycling, forging support to address “carbon tariffs.”

The EU’s Carbon Border Adjustment Mechanism (CBAM) is effectively set in stone. Chongqing should leverage its well-developed industrial system and relatively concentrated geographic advantages to build nationwide ahead of time the first “vehicle-charger-network-scrap-material” whole lifecycle digital carbon tracking system that is verifiable and traceable.

Chongqing’s story is far from over—and it is entering an even higher tide.

Today, this city located at the intersection of the “Belt and Road” and the Yangtze River Economic Belt’s Y-shaped strategic node is putting its massive manufacturing base, its resilient corps of industrial workers, and its city will to innovate and change—everything—on the new era of intelligent electrification.

The power scepter of the global auto industry is moving with this earth-shaking industrial tectonic motion and deep displacement of the value center—triggering an irreversible, decisive transfer.

Looking to the future, facing the wave of global transformation in the auto industry, whether it is technology iteration by automakers, optimization and upgrading of the supply chain, or regional industrial layout planning and execution of overseas strategies, all require professional judgment and guidance through systematic planning.

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