Introduction

Honda remains a major player in the global automotive market.

A few years ago, the automotive industry embraced a frenzy of electric vehicle (EV) launches, driven by the belief that the industry was on the cusp of a transformation. Amidst this backdrop, many Japanese automakers, including Honda, were slow to respond, relying instead on their established strengths in hybrid vehicles.

However, as the EV hype has subsided and forecasts and timelines have been adjusted, Honda's previously perceived competitive disadvantage may now become an advantage.

While the exact timeline for full electrification remains uncertain, its inevitability is beyond doubt. To tap into this emerging field, Honda has partnered with General Motors to launch two EV models: the 2024 Honda Prologue and the Acura ZDX SUV. Although designed by Honda, these vehicles are based on GM's Ultium platform and produced by GM.

Meanwhile, Honda's engineering team is working on a dedicated EV architecture, with initial results already visible. The debut of the Sedan and Space-Hub concept cars marks the birth of Honda's 0 series. The Sedan will enter production in Ohio in 2026, while the flagship model, the first of seven planned by 2030, is highly anticipated.

Disadvantage turns into advantage?

Honda Motor Company recently indicated its willingness to adjust its electrification strategy in response to potentially persistent weakness in pure EV demand, suggesting that the Japanese automaker may follow international peers in revising EV targets.

At Honda's Technology Day last week, Toshihiro Mibe told investors, "If unforeseen changes occur in market conditions, we have sufficient flexibility to adjust the timing of our global EV plant construction and shift our strategic direction as appropriate." He further noted that this might involve delaying some battery production line construction.

Globally, consumer enthusiasm for EVs is waning due to high prices, inadequate charging infrastructure, and range anxiety, leading several automakers to scale back their EV development plans. For example, Volvo Cars has abandoned its goal of selling only pure EVs by the end of the century, while Toyota Motor has pushed back the launch of its first US-made EV to 2026.

Although Honda has set a target to sell only EVs by 2040, Mibe has maintained this goal for now, attributing the current stagnation in EV sales to "short-term market headwinds."

In the first half of this year, Honda sold about 13,000 EVs, accounting for just 0.7% of its overall passenger car sales. Currently, Honda offers 11 EV models globally, including the X-NV and e:NP1 in China, and the Prologue in the US and Canada. Notably, while the Honda e model has ceased production, it is still available for sale from inventory.

At an event showcasing the company's latest hardware and software technologies last Wednesday, Mibe emphasized that EVs remain the "optimal choice" for light trucks and sport utility vehicles.

In May, Honda pledged to invest 10 trillion yen (approximately $67.7 billion) by fiscal year 2031 in its electrification strategy, encompassing software development, supply chain construction, and more, with a focus on building supply chain systems in key markets such as the US, Canada, and Japan.

Honda's much-anticipated electric van, the N-VAN e:, is expected to launch soon in Japan. Additionally, the company plans to introduce a premium EV series, the Honda 0 series, in North America and other markets starting in 2026. Honda also revealed that a new 0 series model will debut at next year's CES technology conference in Las Vegas.

Honda also mentioned new software features that will be standard on the 0 series, such as facial recognition for automatic door unlocking, audio guidance for geographical areas during driving, and an upgraded advanced driver assistance system. Mibe clarified that these features are exclusively designed for Honda vehicles and are unrelated to Honda's software-defined vehicle technology collaboration with Nissan Motor.

In terms of hardware, Honda plans to use superbroadcast technology to manufacture battery cases for the Honda 0 series at its Ohio plant and will apply the technology to produce vehicle chassis from 2028. Furthermore, the company has developed a compact e-Axle system that integrates the motor and inverter, providing more spacious interiors for EVs. Honda will also introduce a new welding technology to reduce frame weight.

The crucial Honda 0 series

While Honda led the way in hybrid technology with its aerodynamic two-door Insight model in the early 2000s, its foray into fully electric vehicles has been relatively slow. So far, Honda's efforts have focused on modifying existing gasoline-powered cars, such as the Fit EV and Clarity, which offer hybrid, pure electric, and fuel cell powertrain options.

Even its first mainstream EV for the US market, the Prologue, is based on GM's Ultium battery platform rather than Honda's in-house technology, and production is handled by GM.

However, Honda is not resting on its laurels. At CES 2024, the company showcased two concept cars, signaling its upcoming push. One, named the Saloon, is scheduled to enter production in 2026 as the first mass-produced model in Honda's 0 series of EVs.

During a media event in Japan, Honda revealed more details about the Saloon's production version. Rather than simply converting popular internal combustion engine cars into EVs, Honda aims for a fundamental shift in EV design.

To this end, the Honda 0 series embodies the design philosophy of "thin and smart." The 0 series vehicles feature a sophisticated electrical architecture that supports AI-powered infotainment systems and ADAS functions. Honda stated that the 0 series will be equipped with LiDAR and will eventually achieve Level 3 autonomous driving. Honda views the 0 series as a holistic software platform, continuously enhancing vehicle performance through over-the-air updates.

In terms of key technical specifications, Honda stated that the 0 series' inverter is 40% smaller than previous versions, and motor friction loss is reduced by 17%. These improvements increase the driving range per charge by 12 miles. Additionally, the battery case is 6% thinner, and its structure has been simplified from 60 parts to just 5. The 0 series will initially adopt a 400V architecture, with plans to upgrade to the faster-charging 800V architecture.

The 0 series is crucial to Honda's electrification goals. Honda aims to have EVs account for 40% of its global sales by 2030 and achieve 100% battery-electric or fuel cell EV sales globally by 2040. Financially, Honda targets a 5% sales return on its EV business by 2030.

For years, Honda has relied on hybrid vehicles to drive its electrification efforts rather than pure EVs. However, the launch of the Honda 0 series will radically change this. As a range of new EVs, Honda's fully electric 0 series, including sedans and SUVs, will officially debut in 2026.

Honda stated that the production version of the Sedan concept car will serve as the flagship model in the 0 series, targeting the premium market and thus likely priced significantly higher than the Accord. By 2030, Honda plans to introduce seven 0 series models globally, covering various market segments.

Can EVs be profitable?

Honda executives noted that initial EV launches may not prioritize profitability, but the entire product line will become profitable through parts sharing, economies of scale, and aftermarket strategies.

Mibe emphasized that the future business model for EVs will differ from that of existing cars, and the value created by EVs will also be distinct. In the traditional internal combustion engine vehicle space, larger cars often translate to higher profits; however, industry insiders understand that large cars equipped with large-capacity batteries may have compressed profit margins due to batteries accounting for 30%-40% of the total cost.

To reduce costs, Honda is focusing on battery materials and production efficiency. Like many automakers, Honda also views the aftermarket as a crucial source of profits, especially for software-defined vehicles, which can generate additional revenue through premium charges or subscriptions for features and services.

While Honda and GM had intended to jointly develop a series of affordable EVs, the plan has since fallen through. Honda plans to introduce affordable EVs at some point in the future, but a specific timeline has not been set. This effort will be undertaken internally at Honda while awaiting the maturity of low-cost technologies such as solid-state batteries.

Shinji Aoyama, Honda's global head of electrification, acknowledged that high battery costs are the primary issue currently, and a corresponding business case has yet to emerge.

Solid-state batteries were initially expected to enter mass production in 2025, but Honda subsequently pushed back this prediction to 2030. Honda has a pilot plant in Tochigi Prefecture for solid-state battery research. However, acquiring the chemical components needed for solid-state battery production at a low cost has proven challenging.

The real cost savings will come from the second-generation EVs, which are expected to begin assembly in a brand-new dedicated plant in Alliston, Ontario, in 2028. This Canadian plant will have an adjacent battery factory and two joint ventures with suppliers to provide cathodes and separators for the battery factory. The battery factory will initially produce lithium-ion batteries, gradually transitioning to solid-state batteries as technology matures, enabling the auto assembly plant to produce more affordable EVs.

Honda executives stated that the Canadian plant will employ the latest flexible and efficient production technologies, with an expected 35% reduction in production costs.

In the Chinese market, Honda has adopted a different strategy from the rest of the world, utilizing distinct EV platforms and supply chains. This is due to China's unique and rapidly evolving market dynamics. By 2027, Honda will introduce 10 Honda-branded EVs as part of its "Ye" series. By 2035, EVs will account for 100% of Honda's auto sales in China.

｜Yang Jing｜