I understand that it’s tough for established car manufacturers to sell electric vehicles (EVs) right now. With incentives shrinking and fierce competition from Chinese automakers, Honda is making a surprising move.
This week, Honda decided to halt its modest EV programs, signaling a lack of commitment to compete in the electric vehicle market. This move could put them at a significant disadvantage as the automotive industry undergoes a major transformation.
The company cites U.S. tariffs and competition from China as reasons for this decision. However, it’s clear that Honda never had a solid EV strategy from the start.
On Thursday, Honda stopped the development of its electric Acura RDX and the Honda 0 sedan and SUV, the company’s first ground-up EVs that received little fanfare. By Friday, reports indicated that Honda would also cease production on the Prologue, a vehicle designed and built by GM.
This decision could have serious implications. By stepping back from EVs, Honda risks falling further behind in two crucial areas: electric drivetrains and software-defined vehicles.
To Honda, and many legacy automakers, an EV is just a car with a different engine. It’s easy to think they can ride out this transition and simply swap out fossil fuel parts later. But that’s a misleading mindset.
Many companies have discovered that modifying a gas-powered car to run on batteries often leads to heavier, less efficient vehicles that are costly to make. Developing EVs from the ground up can not only streamline the manufacturing process but also lead to cost savings.
Take Ford, for example. The Mustang Mach-E has been a popular choice, but it hasn’t been financially rewarding for the company. Ford CEO Jim Farley noted that outdated engineering choices limited its potential, like how its wiring harness is 70 pounds heavier than Tesla’s. Such small mistakes can add up in a complex product like a car.
By stepping away, Honda misses out on valuable learning experiences in both development and manufacturing. They lose the chance to create new supplier relationships and gather customer feedback—insights that are crucial for building successful EVs.
Honda’s retreat from EVs also affects its chances of joining the software-defined vehicle (SDV) movement. SDVs can be enhanced over time with software updates, creating a better user experience. Consumers buying EVs from rivals like Tesla are used to frequent updates and advanced driver assistance features. Unfortunately, Honda has not made significant strides in these areas.
While SDVs don’t have to be electric, they typically align better with EV technologies. The larger batteries in EVs support powerful computing, facilitating over-the-air updates when the vehicle is parked. Although Honda could theoretically create a fossil fuel-based SDV, the company seems more inclined toward conventional manufacturing methods, which are easier for them right now.
At its core, Honda is an internal combustion engine company, and that identity is increasingly threatened. The brand has built a reputation for producing reliable and efficient cars. But as cars become more autonomous, the definition of a “driver’s car” shifts.
While driving experience is still valued, many consumers prioritize reliability and affordability. As electric vehicles become more reliable, Honda’s traditional offerings may struggle to compete. If consumers feel they can get better value from other brands, it may hurt Honda’s sales.
This challenge is evident in China, where Honda acknowledged in a recent report that it has not matched the value proposition of newer EV manufacturers. This has contributed to significant losses for the company. Without a clear EV strategy, Honda’s struggles may soon extend beyond the Chinese market.
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