Honda announced a $15.7 billion writedown of its electric vehicle (EV) business last week as the company shifts its U.S. strategy to account for weak consumer demand for EVs.
The second-largest automaker in Japan said Thursday that it will restructure its EV business and cancel three planned battery-powered EV models that were going to be built and sold in the U.S. market.
Demand for EVs has pulled back in recent years as consumers have shown a preference for hybrid vehicles, while President Donald Trump’s administration has pulled back tax credits that helped incentivize EV purchases.
Honda’s move to pull back on its EV plans, as well as to write down the value of some of its operations in China, may cost as much as $15.7 billion, while the company also said it will report its first annual loss in nearly 70 years. The company’s cash outflows stemming from the writedowns will largely be due to the cost of compensating suppliers.
FORD CEO SAYS ‘CUSTOMER HAS SPOKEN’ AFTER EV SHIFT DRIVES MAJOR QUARTERLY LOSS
Honda first unveiled two concept models for its “Honda 0 Series,” including the Saloon sedan, at the CES trade show in Las Vegas in January 2024, and it had expected to roll out the series’ first vehicles this year, starting in North America.
Those plans have now been called off, with Honda canceling the Saloon along with the Honda 0 SUV and the Acura RSX.
Honda will now pivot its U.S. focus to hybrid vehicles and will also look to strengthen lineup and cost competitiveness in India.
ASTON MARTIN TO CUT UP TO 20% OF ITS WORKFORCE
The company also said that it has struggled to compete with newer companies in China that are focused more on short development cycles and software technologies, like advanced driver-assistance systems (ADAS).
“In such a difficult competitive environment, Honda was unable to deliver products that offer value for money better than that of newer EV manufacturers, resulting in a decline in competitiveness,” the company said.
Battery-powered cars accounted for 2.5% of Honda’s 3.4 million global sales last year, or about 84,000 vehicles.
LAMBORGHINI SCRAPS FIRST EV LAUNCH, CALLS DEVELOPMENT ‘EXPENSIVE HOBBY’
China is the world’s largest auto market and Honda introduced several battery-powered models in the market, but it only sold 17,000 last year, which accounted for just 2.5% of its sales of around 677,000 vehicles in the country and just a fifth of its total EV sales.
Honda said that its initiatives around future EV model introductions will be implemented with flexibility from a long-term perspective while “monitoring the balance between profitability and market trends.”
GET FOX BUSINESS ON THE GO BY CLICKING HERE
The company also said it will announce details related to the reestablishment of its mid- to long-term strategy for its auto business at a press conference in May.
Reuters contributed to this report.
