Honda, Japan's second-largest automaker, announced a $15.7 billion writedown of its electric vehicle (EV) business last week, citing weak consumer demand for EVs in the U.S. market as a key factor for the strategic shift [1]. The company revealed on Thursday that it will restructure its EV business and cancel three planned battery-powered EV models—the Saloon sedan, Honda 0 SUV, and Acura RSX—that were intended for production and sale in the U.S. [1]. These models were initially unveiled as part of the 'Honda 0 Series' at CES in Las Vegas in January 2024, with expectations to launch the first vehicles this year, starting in North America. However, these plans have now been scrapped [1].
Honda's decision comes as demand for EVs has declined, with consumers showing a preference for hybrid vehicles. The pullback in U.S. EV demand has been exacerbated by the Trump administration's rollback of tax credits that previously incentivized EV purchases [1]. The $15.7 billion writedown includes costs related to compensating suppliers and the devaluation of some operations in China. As a result, Honda is set to report its first annual loss in nearly 70 years [1].
Globally, battery-powered cars accounted for only 2.5% of Honda's 3.4 million sales last year, or about 84,000 vehicles. In China, Honda sold just 17,000 battery-powered vehicles in 2023, representing 2.5% of its 677,000 sales in the country and only a fifth of its total EV sales [1]. Honda cited intense competition from newer Chinese companies with shorter development cycles and advanced software technologies, such as ADAS, as a reason for its declining competitiveness in the EV market [1].
Looking forward, Honda will pivot its U.S. strategy toward hybrid vehicles and aims to strengthen its lineup and cost competitiveness in India. The company stated that future EV model introductions will be approached with flexibility, monitoring profitability and market trends. Honda plans to announce details regarding its mid- to long-term auto business strategy at a press conference in May [1].
CONCLUSION
Honda's cancellation of three planned EV models and a $15.7 billion writedown signal a major strategic shift in response to weak EV demand and competitive pressures. The company will focus on hybrids and reassess its EV approach, with further strategic details expected in May. This move is likely to have significant implications for Honda's market position and financial outlook.