Koito Manufacturing to Cut 15% of Automotive Lighting Production Capacity in China

A Major Shift in Production Strategy

Koito Manufacturing, a leading Japanese automotive lighting company, has announced the closure of its Fuzhou Koito Automotive Lamp Co., Ltd. (located in Fuzhou, Fujian Province) by the end of May 2025. This decision will result in a 15% reduction in Koito’s overall production capacity in China. The move is part of a strategic restructuring plan to improve profitability in response to declining sales among Japanese automakers in the region.

By the end of June 2025, the company will formally vote to dissolve the Fuzhou subsidiary, with the liquidation process expected to be completed by June 2026. Despite this major change, Koito has stated that the impact on its consolidated financial results for the fiscal year ending March 2025 will be minimal.

The Role of the Fuzhou Plant

The Fuzhou facility, established in 1995, is the oldest of Koito’s three automotive lighting factories in China. It employs approximately 300 workers and has been responsible for producing key lighting components, including headlights. Moving forward, production will be transferred to Koito’s other factories in China to ensure continued supply and sales.

Market Pressures and Competition

The decision to cut production by 500,000 units (15% of total capacity) comes amid increasing competition from Chinese domestic manufacturers, particularly BYD, which has rapidly gained market share. This shift has put pressure on traditional Japanese automakers like Nissan and Honda, both of which have been experiencing declining sales in China.

Koito’s revenue from its Chinese operations declined by 20% year-over-year between April and December 2024, underscoring the need for an operational realignment. The company aims to optimize its manufacturing footprint in China to better align with current demand and market conditions.

What Undercode Says:

Koito’s decision to reduce production capacity in China is not an isolated case but rather part of a larger trend among Japanese automakers and suppliers struggling to compete in the Chinese market. Let’s analyze the key factors influencing this move:

1. The Decline of Japanese Automakers in China

Japanese car brands have long been dominant players in China, but recent years have seen a sharp decline in their market share. Companies like Nissan, Honda, and Toyota have faced growing challenges due to:
– The rise of domestic Chinese EV manufacturers, particularly BYD and Geely.
– Government incentives favoring local brands and electric vehicles.
– Changing consumer preferences toward more technology-focused and cost-effective vehicles.

2. Overcapacity and Cost Adjustments

Koito’s 15% production cut is a reflection of broader industry trends where companies are reducing excess capacity to remain profitable. Key reasons include:

– Falling demand for gasoline-powered vehicles.

High operational costs in maintaining older production facilities.
Increased pressure to streamline supply chains for efficiency.

3. Strategic Shift Towards Other Markets

Koito is likely reallocating resources to markets where demand remains strong, such as Southeast Asia, North America, and Europe. This move aligns with broader strategies by Japanese automakers to diversify beyond China due to uncertain market conditions.

The EV Revolution and the Future of Automotive Lighting
The shift toward electric vehicles (EVs) presents both challenges and opportunities for Koito. Traditional headlamp production may decline, but advanced lighting systems such as LED and laser-based technology will become more crucial for next-generation vehicles. Koito’s ability to innovate in this space will determine its future success.
What This Means for the Global Auto Industry
Koito’s downsizing in China could be an early indicator of larger changes within the global auto supply chain. Other automotive parts suppliers may follow suit, either scaling back operations in China or shifting investments to regions with more stable demand.

Overall, this restructuring is a necessary move for Koito as it adapts to an evolving industry landscape. However, the company’s ability to remain competitive will depend on its flexibility in responding to new market dynamics, particularly the rapid expansion of Chinese automakers.

Fact Checker Results:

Koito has officially announced the closure of its Fuzhou plant by May 2025, with a 15% reduction in production capacity confirmed.
The primary reason cited is declining sales of Japanese automakers in China, alongside increased competition from domestic manufacturers.
Koito’s revenue from China dropped by 20% year-over-year, supporting the need for capacity reduction.