Honda abandons the electric dream

Honda has just brought a hard blow to the electric dream. In an astonishing reversal, the Japanese car giant has announced that it is rethinking its electrification strategy, noting that electric battery vehicles (BEV) are no longer the Holy Grail of its future.

This decision is a major setback for the VE industry, which is already in shock from the September 30 expiration of federal tax credits that have made competitive electric cars with their gas counterparts. For years, the automotive industry, fascinated by the success of Tesla, was in a arms race to go all electric. Now, one of his biggest players is to pump the brakes. Hard.

“BEVs are not the objective, the best electric vehicles are a way to reach the carbon neutral, not necessarily the only way,” recently declared the president and chief executive officer of Honda Australia, Jay Joseph, to Drive publication. “The BEVs will continue to improve, we work on semiconductor batteries, but our goal is neutral carbon, not electric battery vehicles.”

His statement confirms a dramatic strategic change that Honda leaders presented at a press conference on August 6. They no longer bet on the farm in the electric future.

A nightmarish reality

The reason for the pivot is simple: Honda’s EV strategy has been a financial nightmare. During the press conference, the Director General of the Honda, Eiji Fujimura, admitted that they were “not very optimistic” as to the electric vehicle market, citing the impact of the tax credits at the expiration of the law on the reduction of inflation (IRA) and a “general cooling of the market”. The company is “struggling with sales of this year’s EV series,” said Fujimura, and must “accelerate actions” to meet consumer expectations.

The financial results tell the real story. The last quarter of Honda was hammered by a single load of 113.4 billion yen ($ 780 million) directly linked to its EV activity. This included losses on electric vehicles sold in the United States and a massive radiation of assets for electric vehicle models that the company now exceeds its future range. The company now expects its expenses linked to the EV year to reach an amazing yen of 650 billion yen ($ 4.47 billion).

Honda is currently selling two EV models in the United States, Prologue Honda and Acura ZDX. To sell them, the company was forced to offer massive incentives. According to data from the Motor Intelligence industry cited by Automotive News, Honda spent an average of more than $ 12,000 in promotions on each prologue and $ 21,000 for each ZDX it sold in the last quarter.

Even with these enormous discounts, the market share of the company has decreased.

The pivot of hybrids and hydrogen

These difficulties are aggravated by the expiration of the federal tax credit of $ 7,500 for new electric vehicles, a subsidy which has helped to convince many consumers to make the expensive change. Without this, the high price of electric vehicles and the lack of reliable load infrastructure in many regions of the country become even greater obstacles.

Faced with this brutal reality, Honda turns to a strategy which, until recently, has lacked EV purists. To achieve its carbon neutrality objectives, the company is now based strongly on hybrid vehicles, joining Toyota, whose prudent and hybrid approach was considered outdated a few years ago. Now he looks premonitory. A recent GlobalData report said that between 2025 and 2035, almost all popular Honda models in America would be offered as hybrid.

“I think that at one point, we are going to be all hybrid, all electrified, but it is only another step in this particular transition,” confirmed Joseph to drive.

Honda also explores electricity with hydrogen fuel cells (FCEV), which convert hydrogen into electricity on board. Although FCEVs face their own infrastructure and cost challenges, they only produce water vapor as emissions.

Our grip

Barely a few years ago, the BEVS were the obsession of industry and the clear symbol of the breed to be decarbonized. Now, Honda’s retirement marks a new reality: the path of carbon neutrality seems more complicated, and the BEV strategy only is no longer sacred.

Honda’s decision does not only affect its own range. It sends a warning signal to the automotive industry that the history of electric vehicle growth reaches limits. If one of the largest car manufacturers in the world hides its bets, other companies could follow, slowing down the change in fossil fuels at a critical time for climate objectives.