Honda Launches Full Modification Of Electricity Strategy 'Loss Of Electric Vehicle Business Too Large'

*This content was translated by AI.

Honda of Japan has made a complete revision of its electric vehicle business. This is the result of overinvestment and losses after analyzing business performance. As a result, Honda will effectively make a major adjustment to its existing aggressive EV roadmap.

Honda said in its cumulative earnings report for the third quarter of the fiscal year ended Dec. 31 that asset amortization and related expenses incurred in the drive of its electric vehicle business amounted to a whopping 267.1 billion yen (about $1.71 billion). It is unusual for Honda to report four consecutive quarters of operating losses.

Accumulated operating losses for the first three quarters of the fiscal year totaled 166.4 billion yen (about $1.07 billion), with industry experts predicting the total annual losses incurred in the electric vehicle venture sector could soar to about 700 billion yen (about $4.48 billion). In fact, it's a warning to give up

Honda Senior Vice President Kaihara Noriya said in a recent earnings call that "a fundamental review of existing strategies is urgently needed to rebuild Honda's competitiveness," hinting that the company plans to unveil a new electrification roadmap that has been revamped in the near future.

The most noticeable part of Honda's strategy change is the liquidation of its close cooperation with General Motors (GM), and sluggish sales of Honda Prologue and Acura ZDX, which shared GM's "Ultium" platform, are said to have been a decisive opportunity.

Honda has agreed to pay GM a substantial amount of compensation in exchange for a significant reduction in its originally planned purchase, which is widely analyzed to mean that the exclusive EV partnership between the two companies is in its final stages.

Honda's goal of "selling 2 million electric vehicles per year by 2030" in 2024 disappeared due to slowing global electric vehicle demand and changes in the regulatory environment following the regime change in the United States. A sharp downward revision of the sales target has also become inevitable.

Honda's choice of cards is likely to significantly expand the proportion of hybrid models' sales instead of rapidly electrifying them. By 2026, hybrid sales must be raised to 2.2 million units, double the current level, to make up for lost profitability due to electrification plans.

However, Honda is showing a minimum willingness to maintain the spark of electricity by launching key projects such as the new electric vehicle brand '0 Series' SUV and the next-generation electric vehicle Acura RSX as scheduled in the second half of this year.

In the end, Honda's decision is interpreted as a survival strategy to reduce the enormous cost burden and improve the stability through a realistic alternative of hybrid as the soft landing of the electric vehicle market proceeds slower than expected, which is in line with the "autonomous speed control theory" that the global automobile industry faces.

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*This content was translated by AI.