Honda has been bullish on EVs. CEO Toshihiro Mibe cited trade policies and looser environmental regulations as causes for the course correction.
TOKYO — Honda Motor Co. is dramatically reducing its investment and sales goals for EVs amid shifting regulatory and trade policies.
The company will slash its planned R&D investment in electrification and software, announced last year, by 30 percent through the end of the decade. Honda will shift its focus instead to gasoline-electric hybrid vehicles, including a next-generation technology debuting in 2027.
Japan’s No. 2 carmaker now estimates that EV volume will be around 700,000 to 750,000 vehicles in 2030, down from its expectation for 2 million EVs it announced last year.
By contrast, Honda expects hybrid sales to double to some 2.2 million vehicles in the time.
CEO Toshihiro Mibe fleshed out the plans May 20 at the company’s annual business briefing, saying the R&D spending on EVs and software will total ¥7 trillion ($48.28 billion), down from ¥10 trillion ($68.97 billion).
But overall investment will stay unchanged as Honda spends more on hybrids, internal combustion and the wider deployment of advanced driver assist systems.
Mibe cited loosening environmental regulations in the U.S. and Europe and new trade policies as causes for the course correction.
“It has become increasingly clear that the environmental regulations, which held promise for the widespread adoption of EVs, are becoming relaxed, mainly in the U.S. and Europe,” Mibe said during a press conference at Honda’s global headquarters. “In addition, the recent development in trade policies of various countries makes our business environment increasingly uncertain.”
Mibe said EV demand will be hurt by the rollback of environmental regulations under the Trump administration, the expected loosening of fuel economy standards and possible elimination of tax credit incentives. EV demand could be set back five years by the policy shift.
“If the EV penetration period is pushed back a little, I feel that it will be pushed back by about five years, especially in North America,” Mibe said. “The Trump administration will remain in power for four years, but that doesn’t mean that EV demand will bounce back immediately. I think it will be pushed back by about five to six years.“
The revision drastically scales back Honda’s big push into EVs, a key part of Mibe’s long-term strategy. Among its Japanese competitors, Honda has been the most bullish on EVs. It is the only Japanese automaker to target a complete phaseout of internal combustion in its vehicles by 2040.
Mibe said that goal was unchanged. But the ramp-up would come from the mid-2030s. The company will launch the first of its next-generation 0 Series EVs next year.
Honda cuts EV ambitions by more than 1 million vehicles
Honda’s new outlook aims lower for overall global sales of all automobiles.
Last year, Mibe expected EV sales of 2 million vehicles to account for around 3 million vehicles, implying volume exceeding 6 million vehicles.
In curtailing Honda’s EV ambitions, Mibe said the company now would simply try to increase overall sales beyond the 3.6 million booked in the just-finished fiscal year
The company is also suspending investment in a Canada EV production hub amid uncertainty about trade policy in North America after the Trump administration’s tariff rollout.
The company didn’t give a concrete sales target for 2030. But Mibe showed a sales growth chart for global volume that barely edges upward through the end of the decade.
Honda now expects EVs to account for less than its previously announced target of 30 percent of global volume at the end of the decade. Mibe floated an estimate of 20 percent for EVs, saying that pure electric deliveries could extend into the 700,000-unit range.
That outlook implies global volume climbing only as high as 3.75 million in 2030.
Honda pins growth hopes on hybrids.
From 2027, the company will introduce 13 new hybrids based on a next-generation hybrid vehicie platform. They will be rolled out over a four-year period, Mibe said.
Honda will leverage hybrids to boost profitability, partly by expanding the range of vehicles using the gasoline-electric drivetrains. It will endeavor to improve the value proposition by equipping these hybrids with a next-generation advanced driver-assist system.
In North America, Honda will deploy this next-gen hybrid system to large segments. The goal is to improve the appeal and utility, with improved capability for towing and rough-terrain driving.
The upcoming hybrid platform will achieve a 10 percent improvement in fuel economy over the hybrids Honda sold in 2018. And they will cost half as much to build, Mibe said.
“In contrast to the slowdown in the EV shift, demand for hybrid-electric vehicles is growing,” Mibe said. “In the end, the value of battery-electric vehicles is not yet equal to or greater than the value of the existing hybrid or plug-in hybrid vehicles. That is the main reason why customers have not yet jumped on the EV bandwagon.”
Honda sold 64,444 EVs globally in 2024, more than triple the 19,134 it sold the year before. Honda’s EV sales in North America surpassed volume in China, thanks to its addition of the Honda Prologue and Acura ZDX crossovers that were were jointly developed with General Motors. Honda said it sold 40,308 EVs in North America and 11,450 in China.
But Honda’s hybrids still do the heavy lifting.
Honda sold 868,265 gasoline-electric hybrids globally in 2024, and they accounted for 23 percent of the company’s global sales. Some 308,000 were delivered in North America.
Honda’s worldwide sales dipped 4.6 percent to 3.81 million vehicles in 2024.
Honda’s Canada EV investment will be reappraised in 2 years
Mibe said Honda will use the slowdown in EV demand to improve its product.
“We should take advantage of this period and take the technological evolution to another level, so that customers can buy our BEVs and we will be able to make a profit,” Mibe said. “We will take these difficult times as an opportunity to advance our technology one more cycle, and create value that surpasses the current gasoline-powered cars and HVs within five years.”
The revamped road map came a week after Mibe said Honda would suspend big investments in its Canadian EV production hub and warned that operating profit would crater nearly 60 percent in the current fiscal year after being broadsided by tariffs.
Mibe predicted Honda would face a $4 billion impact from tariffs.
In Canada, Mibe said it would postpone the full investment of ¥1.5 trillion yen ($10.35 billion) in building an EV supply-chain infrastructure for at least two years.
That investment, he said, was predicated on the United States-Mexico-Canada Agreement. With that framework up in the air amid ongoing tariff negotiations, Mibe said Honda would take a fresh look in two years. But it doesn’t mean Honda will necessarily resume investment then.
“We have to look at the situation at that time and make a decision then,” he said. “However, we have already made some investments, but that is not a very large amount. We have curbed our investment where we could.”
Honda, which sources about a third of its U.S. vehicles from plants in tariff-targeted Mexico and Canada and a smaller volume from the home market of Japan, says it is preparing various countermeasures to cope with duties implemented by the Trump administration.
