Honda Downshifts on Its EV Goals Amid Trade, Sales Woes
Japanese automaker Honda is scaling back its once-ambitious electric vehicle investment and sales targets in light of changing emissions regulations and the unsteady international trade environment affecting the largest markets served by the automobile industry.
At the company's annual business briefing in Tokyo on May 20, Honda CEO Toshihiro Mibe revealed plans to erase nearly 30% of its original multi-trillion-Yen investments, dialing down its EV and software research and development budget from ten trillion yen (~$68.97 billion) to seven trillion yen (~$48.28 billion).
The CEO stated that the budget shift comes as auto emissions regulations in North America and Europe have loosened at the same time that trade restrictions make selling cars a more unpredictable business.
"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. "In addition, the recent development in trade policies of various countries makes our business environment increasingly uncertain."
The figurehead also predicted that the onset of the Trump Administration and its attitude toward electric car-friendly policies like the IRA tax credits and the loosening of EPA fuel economy standards will stunlock EV demand for some time, even after a new president takes the seat at the Resolute desk.
On May 19, U.S. Transportation Secretary Sean P. Duffy announced that the National Highway Traffic Safety Administration (NHTSA) recently submitted the interpretive rule, "Resetting the Corporate Average Fuel Economy Program (CAFE)," to the Office of Information and Regulatory Affairs for review. In a statement, Duffy claimed that the Biden administration overreached the government's legal authority by including electric vehicles in setting fuel economy guidelines for automakers, which were set to increase to 50.4 miles per gallon by 2031 from the current 39.1 mpg for light-duty vehicles.
As a result, Mibe is now shooting for EVs to account for 20% of the automaker's sales by 2030. Previously, Honda had a target of 30% by the end of the decade, and it now expects to sell just 700,000 EVs among reduced sales goals of 3.75 million cars in 2030.
"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."
In lieu of its EV evolution with models like the Honda Prologue and Acura ZDX, gas-electric hybrid vehicles like the hybrid versions of models like the Accord, Civic, and CR-V are making the biggest sales dent amongst its selection of electrified vehicle offerings both in the U.S. and around the world.
Data from American Honda shows that in 2024, Honda and Acura sold 40,408 Prologues and ZDXs, but at the same time, over 308,254 hybrid Civics, Accords, and CR-Vs were sold in the United States. Though Honda's worldwide sales took a 4.6% dip to 3.81 million vehicles in 2024, it sold 64,444 EVs and 868,265 hybrids, accounting for 23% of its global sales.
Mibe's May 20 announcement signaled that the brand is doubling down on its gas-electric hybrid technology. He said that starting in 2027, Honda will reveal 13 new hybrid cars underpinned by a next-generation hybrid vehicle platform over the next four years. Specifically in North America, this new next-gen hybrid system will find its way onto its larger offerings, which it claims will improve their towing and rough-terrain driving capabilities.
The Honda CEO claims that the upcoming hybrid platform will be at least 10% more fuel efficient than Honda's 2018 hybrids and will cost half as much to build. Furthermore, Mibe said that its customers aren't entirely sold on EVs over hybrids or pure gas cars just yet, noting that "the main reason why customers have not yet jumped on the EV bandwagon" is that they see "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."
Though the situation sounds as if a demoralized Honda is giving up on EV technology research and development for good, Mibe said it'll take this lull period as an opportunity to improve its future offerings.
"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."
I am no automotive executive, but I think that Toyota has a slight edge over Honda because of its fearlessness in making hybrids fairly mainstream. The 2025 Camry is one great example, as all trims, including the base LE model, come with a hybrid engine.
Believe it or not, Honda is the first automaker in the United States to sell a hybrid vehicle. The first-generation Insight went on sale in the U.S. in December 1999, and seven months later, the first Toyota Prius was released. I hope that the decision Honda makes at this point builds on the legacy they already have.
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