Honda has announced that it will reduce its investments in electric cars due to declining demand and focus on the growing demand for hybrid vehicles with new models. Motorcycles will also play a larger role in the company’s plans.
The Japanese manufacturer has stated that it will reduce its investments in electrification and software from the previously planned 10 trillion yen (±€ 60 billion) to 7 trillion yen (±€ 43 billion) by 2030. In view of the current market slowdown, Honda expects BEV sales to fall below the previously targeted 30 percent mark in 2030.
The company still intends to reach its goals of ‘carbon neutrality for all products and corporate activities’ and ‘zero traffic collision fatalities’ by 2050. However, the company does not believe that it will reach its 2030 target of 30% EV sales.
Citing a high market demand for HEV models, Honda is now realigning its strategy, so that “mostly next-generation HEV models will be introduced to the market in 2027 onward, as the powertrain that will play a key role during the transition period toward the popularization of EVs and further enhance of its HEV lineup.”
Honda CEO Toshihiro Mibe cited loosening environmental regulations in the U.S. and Europe and new trade policies as causes for the course correction. “It has become increasingly clear that the environmental regulations, which held promise for the widespread adoption of EVs, are becoming relaxed, mainly in the U.S. and Europe,” Mibe said during a press conference at Honda’s global headquarters. “In addition, the recent development in trade policies of various countries makes our business environment increasingly uncertain.”
Mibe said EV demand will be hurt by the rollback of environmental regulations under the Trump administration, the expected loosening of fuel economy standards, and the possible elimination of tax credit incentives. The policy shift could set EV demand back five years.
“If the EV penetration period is pushed back, I feel that it will be pushed back by about five years, especially in North America,” Mibe said. “The Trump administration will remain in power for four years, but that doesn’t mean EV demand will bounce back immediately. I think it will be pushed back by about five to six years.“
New strategic plan
Under the new strategic plan, Honda plans to improve profitability with the continuous expansion of its motorcycle business, coupled with cost reduction effects in the automobile business associated with adopting the next-generation e:HEV system and platforms, and an increase in unit sales of HEV models.
Specifically, Honda cites the goal of improving HEV technology to improve fuel economy by 10% and reduce costs for the hybrid system itself by 50%, at least compared to 2018 models. Regarding model development, the company writes that it will launch 13 HEV models globally over four years starting in 2027.
Next to the hybrid vehicle production and development plans, Honda announced plans to develop a next-generation ADAS system, which will play a significant role in the company’s 2050 plans to avoid accidents. The system is planned to be ready for its market launch in 2027, when “Honda will apply this new, next-generation ADAS to a broad range of key EV and HEV models Honda will launch in North America and Japan.”
Another plan for China
For China, Honda has another plan to develop technology exclusively for the local market: “In China, where electrification and application of intelligent technologies are proceeding faster than other regions, Honda will work with Momenta Global Limited, a Chinese startup company developing autonomous driving technology, to develop next-generation ADAS optimized for road conditions in China and install it to all future models Honda will launch in China.”
Honda is also developing something specifically for the North American market, where customers tend to prefer bigger vehicles: “Honda will develop a hybrid system for large-size vehicles, which will feature powerful driving performance, high towing capability, and high environmental performance.” This will be launched “in the latter half of the 2020s.”
The importance of motorcycles
As Honda writes that it intends to use the motorcycle market to break further into profitability, the company also cites its sales numbers for the last fiscal year (April 2024-March 2025): “Honda motorcycle unit sales reached 20.57 million units, which account for approximately 40% of the global motorcycle market, setting an all-time record for fiscal year sales in 37 countries and territories.”
The focus here is on the Global South, with India being the most crucial market. Honda expects this market to grow globally to a demand of “60 million units by around 2030.” Honda’s strategy here is also not exclusively electric, however. The company will accelerate the electrification of its motorcycle products “while also improving the fuel economy of its ICE models and expanding the lineup of flex-fuel compatible models.”
Recently, Honda announced that it was putting its plan to invest billions in electric cars in Canada on hold for “about two years.” Not long before that, the company presented two new electric cars for the Chinese market. A new fuel cell module with 150 kW of power was also presented earlier this year, following the failure of the Nissan-Honda merger.
