Nikkei News: Due to a slowdown in U.S. market demand, Honda has halted the development of a large SUV for its EV strategy model and shifted to producing HV

Nikkei News reported on July 5 that facing a slowdown in electric vehicle demand in the U.S. market, Honda urgently adjusted its strategic layout, terminating the development plan for a large electric SUV and cutting its planned 1 trillion yen investment in electrification by 300 billion yen, shifting focus to hybrid vehicles.

Honda announced that its target for pure electric vehicle sales by 2030 has been lowered from 30% to around 20%, with hybrid vehicles becoming the core growth engine, aiming for sales of 2.2 million units, accounting for more than 60% of total sales. This adjustment is directly reflected in the allocation of investments: the original 1 trillion yen budget for electrification by 2030 has been reduced to 700 billion yen, and projects related to the Canadian electric vehicle value chain and new factory construction have been postponed.

The financial pressure is the key driving force behind the strategic shift. Honda's net profit for the fiscal year 2024 fell by 24.5% year-on-year, and it is expected that the operating profit for the 2025 fiscal year will drop sharply by 59%. Company President Tetsu Mita stated that this is a "reassessment of the reality of electric vehicles" — the growth rate of electric vehicle sales in the North American market dropped from 47% last year to 2.7% this quarter, with insufficient charging infrastructure and cost concerns dampening consumer enthusiasm.

Hybrid technology has moved to the forefront. Honda plans to launch 13 new-generation hybrid models globally starting in 2027, upgrading to a dual-motor system to improve fuel economy by over 10%, and reducing the cost of hybrid systems by 50% compared to 2018 through parts standardization. A Nomi Securities analyst pointed out that hybrid cars have a profit margin 3-5 percentage points higher than that of comparable electric vehicles, making them more beneficial for maintaining cash flow under capital pressure.

The pure electric vehicle route has not been abandoned but has become more precise. After canceling the original strategic model, the large electric SUV, resources will be concentrated on the "0 Series" premium electric vehicle series set to launch in 2026. The first saloon and an SUV of this series will debut in North America, equipped with a revolutionary ASIMO OS operating system and Level 3 autonomous driving technology, with a range of 480 kilometers. By 2030, this series will expand to seven models, but the product positioning will clearly focus on high performance and technological attributes, avoiding the mainstream market red sea.

The trend of retreat in electrification among traditional automakers has triggered a chain reaction. Ford also canceled the three-row electric SUV project, losing $1.9 billion, and reduced its capital expenditure on electric vehicles from 40% to 30%. Mizuho analysts believe that Honda and Ford's shift reflects an industry consensus: "Hybrids are the optimal solution during the transition to electrification."

The Chinese market has become the only exception with an aggressive layout. Honda launched its premium electric sub-brand "Ye" in China, and this year will produce the Ye S7 crossover SUV, with a plan to achieve 100% sales of pure electric vehicles by 2035. The locally adapted ADAS system developed in collaboration with Momenta will be suitable for China's complex road conditions, highlighting a regional differentiation strategy.

Market reactions to Honda's strategic adjustments are divided: Jefferies is concerned about its long-term electric competitiveness, but UBS maintains an "buy" rating, believing that the hybrid business can provide a safety margin. As Tetsu Mita said: "This is not a retreat, but a repositioning after understanding the rhythm" — in the marathon of electrification, Honda has chosen to put on the "more comfortable running shoes" of hybrids.

Original article: https://www.toutiao.com/article/1836802278476042/

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