Honda Motor Co. has become the first Japanese automaker to publicly announce that it will phase out gasoline-powered cars, set a target for 2040 and give newly appointed Chief Executive Officer Toshihiro Mibe the one-time chance to start his career with his stamp on a company who can trace their ancestry back 84 years.
“It’s a very bold goal,” said Yachiyo Tanaka, an analyst at automotive research firm Fourin. “Honda is committed to staying one step ahead of other automakers by adopting the latest technology.”
The loot, if Mibe can do it, is considerable. Prime Minister Yoshihide Suga has pledged to be carbon neutral by 2050 and companies with a first mover advantage could gain market share. The spread of electric vehicles in the country is 1%, which is well below China, the world’s largest market for electric cars, with around 6%.
But it is a bet that also extends beyond the borders of Japan. According to BloombergNEF, global sales of electric car electric vehicles will grow sharply, rising from 3.1 million in 2020 to 14 million in 2025. Honda, which sources about 56% of its sales from North America and about a quarter from Asia excluding Japan, has already started partnering with high performing overseas automakers and signed a pact to harness General Motors Co.’s battery technology last year.
A Honda Motor Co. “e” electric vehicle on a test drive in Tokyo, Japan on June 17th (Bloomberg)
Honda’s electric strategy includes its traditional strength – motorcycles. Honda plans to introduce three new electric two-wheelers and ten new electric vehicles in China within five years by 2024. (His first mass-produced Honda e, launched last year, has a global sales target of 10,000 units per year.)
While motorcycles make up about 14% of Honda’s total sales, their sales volumes are much higher. Honda sells around 15 million two-wheelers a year versus around 4.5 million cars. Compare that to projections for electric two-wheeler sales of 78 million in 2040, up from 27 million in 2020, and it’s not hard to see the appeal.
In March, Honda formed a consortium with Yamaha Motor Co., KTM AG and Italy’s Piaggio & C SpA to develop interchangeable battery standards for electric two-wheelers, three-wheelers and four-wheelers, as the global price drop for lithium-ion batteries continues to attract high-volume manufacturers Motorcycle market.
Honda “won’t hesitate” to form alliances if necessary, said Mibe, who took the reins on April 1, at its opening news conference this month. He added that he thought the Japanese government’s goal was reasonable.
The interior of a Honda Motor Co. “e” electric vehicle during a test drive in Tokyo, Japan on June 17 (Bloomberg)
“We can’t put off our efforts and then expect to hit the target at the last minute,” said Mibe, 59, although he noted that selling only zero-emission vehicles by 2040 will be “an uphill battle.”
Honda declined to make Mibe available for an interview.
Honda operates Honda Manufacturing of Alabama, the automaker’s largest facility in the world, which makes the Passport and Pilot SUVs, the Odyssey minivan and the Ridgeline pickup truck. It also produces the traditional V-6 gas engines that power the cars. It does not produce electric vehicles in the factory.
Honda’s EV plan, announced in April, does not mention the Alabama plant or the vehicles it makes, but refers to its plans for an electric SUV.
Honda Manufacturing of Alabama is in Lincoln. (Honda)
Critics of the Honda strategy wonder whether the goal is realistic. Bigger players like Ford Motor Co. don’t expect to be 100% carbon neutral by 2050, while Toyota Motor Corp. Assigns a more important role to hybrids. It is a short-term tactic to attract the attention of stakeholders when the focus on environmental, social and corporate governance increases, said Takeshi Miyao, an analyst at Carnorama.
In order to position itself in the market, Honda has to say something different than Toyota, he said. “Honda had no choice but to unveil a plan that is almost the opposite in order to appeal to investors. There’s no point in saying the same thing, ”said Miyao.
Honda’s decision to end its long history with gasoline engines is a definite change.
The promise comes after former CEO Takahiro Hachigo, amid falling profits at Honda’s auto division, took cost-cutting measures, closed factories, cut models and stopped the company from participating in the Formula 1 World Championship at the end of the 2021 season, leaving fans dismayed .
Honda was involved in Formula 1 more than half a century ago, competed as a participant, designer and engine supplier and won several championships in the world’s most watched motorsport competition.
Mibe said at Honda’s annual general meeting on Wednesday that the automaker may consider participating in a car race “after we win the race for carbon neutrality.”
The split was bittersweet for Honda engineers too. It can be more difficult to differentiate electric cars in the market, which is a problem for the entire auto industry, said one. Another, who refused to be identified for not being allowed to speak publicly, said although the all-electric target may be challenging, Mibe has at least set a clear strategy and the overall mood within the company is positive.
“It was a statement that only the CEO could make,” and inevitable given the world situation, said Tomiji Sugimoto, a former Honda engineer who runs an automotive consultancy. But the goal is convincing, because Mibe is a trained engineer, said Sugimoto, who retired in 2016 after a 39-year career at Honda and knew Mibe personally.
Mibe is not afraid of any challenge. As the automaker’s 34-year veteran, he has spent considerable time directing the company’s R&D efforts and focusing on striking the difficult balance between innovation and commercialization. In April 2020 he took over the management of Monozukuri, a Japanese word that literally means “making things”.
Honda’s electric boost boils down to “how quickly we can make the EV business profitable,” he said earlier this year. “Companies that do it quickly will survive.”
