After initially pledging to launch a whopping 30 new electric vehicle models by 2030, including three electric SUVs built in the United States, Tokyo-based Honda has revealed that it has shelved plans to build the Acura RSX, 0 Series Saloon, and 0 Series SUV.
Like many other carmakers operating in the U.S. market, Honda was enthusiastic about the transition to battery electric cars and planned to invest $65 billion into its electrification efforts. However, just like its counterparts, Honda was forced to downscale its enthusiastic plans for electrification in the face of various mitigating factors.
According to a statement from the firm, it is ending plans to produce 3 EVs in the U.S. due to a variety of factors that forced it to rethink its electrification strategy. Two of the main reasons behind Honda’s retreat from America’s nascent electric vehicle market are intrinsically linked; price and lack of government support.
On average, an electric car will cost several thousand more than an internal combustion engine (ICE) vehicle of comparable performance, with costs rising if drivers chose to install home chargers.
The high costs involved in purchasing an electric car prevented most of the market from going electric, even with federal government subsidies of up to $7,500 for new EVs and $3,000 for second-hand units. Honda and many other carmakers failed to tap into the larger American vehicle market due to the premium costs associated with electric cars.
Second, the Trump administration’s decision to phase out the federal EV subsidies that helped thousands of drivers make the transition to EVs represented a major blow for Honda, which also needed the subsidy to make its electric units affordable and accessible.
Without these subsidies, automakers like Honda would have to make a loss for each EV they sell, as the cost of producing electric cars in the U.S. is so high that American-made electric cars have to be subsidized to be profitable. Consequently, Honda’s announcement wasn’t a surprise given its own sluggish EV sales, similar declarations by other carmakers in the past, and the auto industry’s lackluster performance in recent months.
According to Honda, profitability in its automotive wing has been affected by U.S. tariffs impacting hybrid and combustion engine cars. Focusing more resources on electric vehicle development also caused Honda’s other products to be less competitive in Asia, arguably its largest markets, causing its overall profits to dip as well.
Since EVs haven’t proven to be a very profitable venture for Honda anyway, stepping back from electric cars to focus on other better-selling products is prudent. The Japanese carmaker joins Ford, Lamborghini, General Motors, Stellantis, and Volkswagen in scaling back its electrification targets, and expects to take a $15.7 billion hit as it restructures.
On the international scene, legacy carmakers like Ferrari N.V. (NYSE: RACE) are focused on bringing to market electrified versions of their iconic models. It remains to be seen how those efforts will fare in key markets like the U.S.
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