Honda Pledges $65B for EVs, Targets Full Electrification by 2040

Key Takeaway

• Honda commits $65 billion over 10 years to its EV strategy, aiming for EVs to be 100% of global sales by 2040.
• Plans include launching seven new EV models by 2030 and selling 1 million hybrids this year as a bridge to full electrification.
• Investment focuses on reducing manufacturing costs, securing supply chains in key markets like the US, Canada, and Japan, and enhancing software development.

Honda's Electrification Strategy

Honda Motor Co. has announced a significant investment of 10 trillion yen ($65 billion) into its electrification strategy over the next decade, aiming to address the growing demand for battery-powered vehicles. This investment will span until fiscal 2031 and is set to cover various areas including software, research and development, and the establishment of supply chains in crucial markets such as the US, Canada, and Japan. The company's ambitious goal is for battery and fuel-cell EVs to account for 100% of its global sales by 2040. In line with this target, Honda plans to introduce seven new EV models globally by 2030, with two new EV models set to be launched in China later this year and an EV with a swappable battery in Japan by the end of fiscal 2026.

Hybrid Vehicles as a Stepping Stone

Despite the focus on full electrification, Honda continues to see significant value in hybrid vehicles, especially as higher interest rates and diminishing subsidies currently dampen the demand for fully battery-powered cars. The company has plans to sell 1 million hybrid vehicles this year and is preparing to increase its production capacity to 2 million units annually. This strategy not only caters to the current market demand but also serves as a financial and technological bridge to the company's future in full electrification. Honda's CEO, Toshihiro Mibe, emphasized the global shift towards decarbonization, stating, "EVs are the best course for cars."

Addressing Supply Chain and Manufacturing Costs

A core component of Honda's electrification strategy involves securing a robust supply chain and reducing manufacturing costs. The company has committed C$15 billion ($11 billion) to establish a supply chain in Canada, with plans to start producing EVs there in 2028. Honda aims to reduce EV manufacturing costs by about a third and cut battery procurement costs by 20% in North America. Mibe also highlighted the necessity of building an EV factory in Japan to meet the production target of about 2 million EVs per year. Additionally, Honda is investing in research and development of software to enhance mobility, indicating a holistic approach to its electrification strategy.

Industry Trends and Competitive Landscape

The automotive industry is witnessing a significant shift towards hybrid vehicles, with major automakers globally, including Toyota, Ford, and Hyundai, increasing their focus on this segment. Toyota's hybrid vehicle sales soared 32% to 3.59 million units, contributing to a record operating profit. The global EV market grew 18% in the first quarter of 2024, with hybrids outpacing BEVs due to their lower costs and absence of range anxiety. This trend underscores the competitive landscape Honda is navigating, as it aims to strengthen its position in both the hybrid and fully electric vehicle markets.

Management Quotes

• Toshihiro Mibe, CEO of Honda Motor Co.:

  "EVs are the best course for cars."
  "We have no plans to give up the Chinese market."