Introduction

The Untold Story Behind Sony Honda's EV Project Cancellation

Recently, a piece of news has sent shockwaves through the global automotive industry. Sony Group and Honda Motor have jointly announced the cancellation of the development and launch plans for the entire range of pure electric vehicles (EVs) under the Afeela brand, operated by their joint venture, Sony Honda Mobility (SHM).

This model, which was merely months away from delivery in North America and had been eagerly anticipated as a breakthrough for Japanese high-end pure EVs, ultimately hit a roadblock on the eve of mass production.

From the cross-industry partnership that sparked widespread excitement in 2022 to the regrettable termination in 2026, the end of this alliance between technology and manufacturing is not merely the conclusion of a project but also a microcosm of traditional automakers' strategic shifts amid the global electrification wave.

From High-Profile Partnership to Mass Production Setback

Rewinding to 2022, the global electrification boom was in full swing, with Tesla leading the charge and Chinese brands accelerating their overseas expansion. Traditional automakers were embarking on their transformation journeys. In March of that year, consumer electronics giant Sony and Japanese automaking benchmark Honda joined forces, signing a strategic cooperation Letter of Intent. By October, they had each contributed 50% to establish Sony Honda Mobility, with a registered capital of ¥10 billion and headquarters in Tokyo. Yasuhide Mizuno, former head of Honda China, was appointed Chairman and CEO, while Izumi Kawanishi, President of Sony Mobility, served as President and COO. A cross-industry car-building spectacle officially commenced.

The division of labor in the partnership was clear and promising at the time. Honda contributed its decades of expertise in vehicle manufacturing, engineering R&D, and supply chain management, responsible for the vehicle's driving performance, production, and after-sales service. Sony leveraged its strengths in software, audio-visual entertainment, and sensors, leading the development of automotive software, in-car entertainment systems, and the construction of a mobility service platform.

With a clear goal of targeting the North American high-end intelligent pure EV market, the two sides even discussed the possibility of an independent IPO for the joint venture. This cooperation was seen as an important attempt by Japanese automakers to compete against Tesla and Chinese high-end brands.

At CES 2023, Sony Honda officially unveiled the new pure EV brand Afeela, with its first concept car making its debut simultaneously. The futuristic design and intelligent configuration instantly captured industry attention. At CES 2025, the mass-production version of the Afeela 1 made its global debut, offering two models: Origin and Signature, with starting prices of $89,900 and $102,900, respectively, positioning it as a mid-to-large luxury pure EV sedan. The vehicle showcased technological integration from both sides.

According to the initial plan, the Afeela 1 was set to open for pre-sales in the first half of 2025, adopting an online direct-sales model. Trial production was scheduled to start in August 2025, with deliveries to the U.S. market beginning in spring 2026, followed by Japan in the second half of the year, and a second model planned for 2028. In January 2026, SHM revealed that trial production of the Afeela 1 had already commenced at Honda's Ohio plant, and pre-orders in California had smoothly begun. Everything was progressing steadily toward mass production and delivery.

No one could have anticipated that the project would come to an abrupt halt just two months later. In its official statement, SHM announced that it would fully refund deposits to pre-ordered customers, and Sony, Honda, and SHM would jointly reassess the subsequent business direction of the joint venture.

Honda's Proactive Shift in Electrification Strategy

The termination of the Sony Honda Afeela project was not entirely without warning. Its core reason lies in a significant adjustment to Honda's global electrification strategy. Just 13 days before the project's termination, on March 12, Honda issued its most severe performance warning since its listing in 1957: It expected an operating loss of ¥270 billion to ¥570 billion and a net loss of ¥420 billion to ¥690 billion for the 2025 fiscal year (April 2025-March 2026). This marked Honda's first annual loss.

Behind the massive losses was an imbalance between the aggressive investments in its pure EV strategy over the past four years and market feedback. Honda announced that it would recognize asset impairment and investment losses of up to ¥2.5 trillion for its electrification business, equivalent to 2.7 times its net profit for the 2024 fiscal year, erasing the cumulative profits of the past three years.

In fact, Honda has never ceased its exploration of electrification. Previously, Honda had set a goal of converting all new vehicles to EVs and fuel cell vehicles by 2040. In 2024, it unveiled an electrification plan involving ¥10 trillion in investments by 2030, with ¥3.5 trillion already invested by that point. It also planned to sell 2 million pure EVs globally by 2030.

To advance its pure EV layout, Honda engaged in multiple collaborations. Not only did it partner with Sony to create a high-end brand, but it also collaborated with General Motors to launch two pure EV models, the Prologue and Acura ZDX, based on the Ultium platform. Simultaneously, it developed its own 0 Series pure EV platform, planning three models: the Honda 0 SUV, Honda 0 Saloon, and Acura RSX, targeting the Tesla Model 3 and Model Y.

However, market changes exceeded expectations. North America, Honda's core profit market, saw slowed EV demand growth, compounded by adjustments to U.S. government EV support policies, causing Honda's pure EV layout to encounter repeated setbacks. In 2025, Honda sold only 39,200 units of the Prologue, developed in collaboration with General Motors, far below the annual sales target of 100,000 units, ultimately leading to its discontinuation. The Acura ZDX also withdrew from the market due to poor sales. Honda's self-developed 0 Series pure EV platform faced delays, cost overruns, and weaker-than-expected market demand, prompting Honda to cancel the research, development, and launch plans for these three models in North America. Globally, Honda sold fewer than 100,000 pure EVs in 2025, accounting for less than 3% of its total annual sales of 3.522 million units, a stark contrast to BYD's 2.2567 million and Tesla's 1.6361 million pure EV sales.

Against this backdrop, Honda made a significant adjustment to its electrification strategy: It drastically reduced its global pure EV annual sales target for 2030 from 2 million to 700,000-750,000 units, terminated its electrification collaboration with General Motors, and shifted its strategic focus back to hybrid vehicles. It planned to increase annual hybrid vehicle sales to 2.2 million units by 2030 to stabilize its profit base. The R&D system was also adjusted accordingly. Starting April 1, 2026, automotive R&D functions will return to Honda R&D Co., Ltd., focusing on hybrid and core technology self-development while scaling back non-profitable pure EV projects.

The Sony Honda Afeela project heavily relied on Honda's chassis technology, production facilities, and manufacturing system, with Honda's Ohio plant being its sole planned mass production base. As Honda reduced its pure EV production capacity and R&D investments, the core resources originally slated for provision could not be delivered as planned, leaving the Afeela model without a marketization foundation.

For Honda, terminating the project at this juncture was also a choice to cut losses promptly. This high-end model, priced at over ¥700,000, faced competition from the Tesla Model S and Lucid Air while also contending with the global pressure from Chinese high-end new energy brands. Its sales prospects were uncertain, and the asset-light contract manufacturing model could not amortize the high R&D costs of Sony's in-car entertainment system, making the likelihood of losses upon mass production extremely high.

Cross-Industry Attempt Ends, Electrification Race Reshuffles

The termination of the Sony Honda Afeela project has had a differentiated impact on both parties. Sony stated that given SHM's "asset-light" operational model, the project's termination would not significantly affect the group's overall financial condition. In fact, Sony's role in this cooperation primarily involved outputting software, entertainment technology, and brand resources without large-scale production and manufacturing cost investments. Even with the project's termination, its technological accumulations in sensors, in-car entertainment, and other areas could still be applied to other collaborations and business scenarios.

Previously, Sony had hoped to use Afeela as a platform to transform cars into "mobile entertainment spaces," increasing user entertainment time and expanding revenue channels through animations, games, films, and television. Although this vision has not yet been realized, it has not impacted Sony's core business.

Honda stated that the project's termination would have minimal impact on its consolidated financial forecast for the current fiscal year. This is because Honda had already factored in the relevant effects of the Afeela project into the ¥2.5 trillion asset impairment calculation, making financial preparations in advance.

Nevertheless, the termination of this cross-industry cooperation remains an attempt and exploration in Honda's electrification transformation. The cross-industry technological integration experience accumulated during the cooperation will still provide references for subsequent technological R&D.

Honda has not abandoned electrification but has chosen a pace more aligned with market realities, shifting from aggressive expansion to steady progress. It aims to first solidify its profit base with hybrid models before advancing its pure EV layout when the time is right.

For Sony Honda Mobility, the joint venture's future direction remains unclear, and the three parties will engage in further consultations. What is certain is that, in addition to terminating the development of the Afeela 1 and the second model, the company will handle subsequent matters properly, fully refunding deposits to pre-ordered customers to protect consumer rights.

The impact of this project's termination extends beyond Sony and Honda, reflecting new changes in the current global electrification market.

On the one hand, slowed EV demand growth in the North American market has become a significant contributing factor for Japanese automakers to adjust their electrification strategies. Other Japanese automakers, such as Subaru, have also begun reassessing their electrification investment plans and strengthening hybrid vehicle development. On the other hand, Chinese brands' influence in the global electrification market continues to expand. In 2025, BYD's pure EV sales surpassed Tesla's for the first time, making it the global leader. New forces like Xiaomi have also achieved profitability in their EV businesses. In core areas such as autonomous driving, battery technology, and cost control, Chinese brands' advantages are becoming increasingly apparent. Huawei's intelligent driving systems and self-developed operating systems have been widely applied in partner brands. The deep integration of electrification and intelligence has made Chinese brands a significant force in the global electrification wave.

From an industry perspective, although Sony Honda's cross-industry cooperation was unsuccessful, its attempt provided valuable experience for the industry: The electrification and intelligent transformation of the automotive industry are not simply about technological combination but require a comprehensive integration of product definition, cost control, supply chain collaboration, and channel layout. It demands both the hard power of hardware manufacturing and the soft power of software ecosystems, as well as strategic judgments that align with market demand.

Amid the global electrification wave, there will be successful benchmarks and exploratory trials and errors. Each attempt and adjustment drives the industry toward a more mature and rational direction.

For Honda, this strategic adjustment does not mean abandoning electrification but rather seeking a transformation pace more suited to itself amid market changes. For Sony, although this cross-industry attempt has ended, its exploration in the intelligent mobility field continues. Meanwhile, the global automotive industry's electrification transformation is still ongoing, with players on the track adjusting their running postures according to market changes.