Honda Motor has announced that it will discontinue its automobile sales operations in South Korea by the end of 2026, marking the conclusion of more than two decades of passenger vehicle sales in the country.

The decision, which affects its local subsidiary Honda Korea, reflects changes in both the global and South Korean automotive markets, as well as the company's strategy to concentrate resources on areas of long-term competitiveness.

Honda stated that it has offered models such as the Accord and CR-V in South Korea since entering the passenger vehicle segment in 2004. The company initially established its local presence in 2001, focusing on large two-wheelers, before expanding into automobile sales. During its early years, Honda increased access to imported vehicles, particularly through competitively priced models. In 2008, it became the first imported car brand to surpass annual sales of more than 10,000 units and briefly ranked first among imported brands in the country.

However, the South Korean automotive market has remained limited for Honda and is dominated by domestic manufacturers such as Hyundai Motor Company and Kia. Competition has intensified further with the expansion of Chinese automakers, including BYD Company, and the growing presence of electric vehicle-focused brands such as Tesla.

Honda's sales performance in South Korea has declined in recent years, recording a year-on-year decline of more than 20%. The decline has been attributed to increasing competition, limited new model introductions, and a market shift towards electric vehicles.

Globally, Honda has also faced challenges across key Asian markets. In China, retail sales declined by around 60% compared with five years earlier. The company is also planning to shut down at least one joint venture plant in China, according to sources cited by a local daily. Sales have also declined year-on-year in Thailand, Malaysia, and Indonesia.

Additional pressures have emerged from currency fluctuations. Honda imports all vehicles sold in South Korea from its plant in Ohio, United States, making profitability sensitive to exchange rate movements, particularly a strong US dollar. In contrast, its two-wheeler business, which sources products from Japan and Southeast Asia, has been less affected.

Lee Ji-hong, head of Honda Korea, stated during a press conference in Seoul, "We will discontinue our automobile sales business in Korea by the end of this year. However, we will continue to strengthen our domestic two-wheeler business as a core operation in the future." He further added, "Securing long-term competitiveness requires prioritising investment in our core two-wheeler business."

Despite the discontinuation of automobile sales, Honda confirmed that it will continue to provide after-sales services, including vehicle maintenance, parts supply, and warranty support, for at least eight years, in line with legal requirements. The company also indicated that it may extend support beyond this period, although it does not plan to compensate customers for any decline in used vehicle values.

Honda Korea will continue to focus on its two-wheeler division, which holds approximately 40% market share in the domestic two-wheeler segment, and plans to expand its product range and customer services in this segment.

Honda's presence in South Korea has been shaped by several challenges over time. The 2019 Japan-South Korea trade dispute and the subsequent boycott of Japanese products significantly affected its operations, with operating profit declining by nearly 90% year-on-year. The withdrawal of Nissan Motor from the market in December 2020 further increased uncertainty regarding Honda's position.

In response to declining performance, Honda introduced measures such as expanding online direct sales and adopting a fixed-price system in 2023, becoming the first imported car brand in South Korea to transition entirely to online sales. The company also increased its focus on hybrid models while scaling back certain electric vehicle initiatives. Globally, Honda halted development of three electric vehicles - the Honda Zero Saloon, Honda Zero SUV, and Acura RSX - and suspended its joint venture with Sony Group Corporation.

Industry observers have cited multiple factors behind Honda's exit, including intensified competition from domestic and Chinese manufacturers, evolving consumer preferences, and structural changes in the market. The South Korean automotive sector has experienced several exits by Japanese brands over time. Subaru Corporation withdrew after entering in 2010, while Mitsubishi Motors ceased operations in 2012 due to weak performance. Following Nissan's exit in 2020, Infiniti also left the market. At present, Toyota Motor, through its Lexus brand, remains the only major Japanese automaker operating in South Korea.

The decision to exit automobile sales is not expected to have a significant immediate impact on the overall market. However, analysts indicate that it reflects broader challenges faced by foreign automakers in South Korea, particularly in adapting to shifts towards electrification and evolving consumer demand.