Honda defies electric vehicle mania and relies on hybrid cars

Honda said it would pour $40 billion into electric vehicles over the next decade, but stayed close to throwing its full weight on battery-powered vehicles as it bets its hybrid cars will dominate in the near future.

While the company became the first Japanese automaker to phase out gasoline cars last April, Honda has only one EV model on the market, lagging behind Volkswagen and other global players.

It said Tuesday it will rely on its hybrid models with a gasoline-electric system until infrastructure is ready to support more electric vehicles on the roads, in a subsequent move hedging logic by other automakers Toyota and BMW.

“We need to consider several factors, such as the living environment and the penetration rate of renewable energy, rather than simply switching to electric vehicles,” said Toshihiro Mibe, Honda’s chief executive, who took on the role last April.

Mibe stressed that Honda’s hybrid technology, which combines a smaller petrol or diesel engine with a battery, will lead the company over the next decade. “We’re ending conventional engines, but we will continue to focus on hybrids and that will be our strength in 2030 or even 2035,” he said.

The automaker outlined plans to make the most of its ties with General Motors Sony to break into the affordable EV market. By 2030, it will launch 30 EV models and produce more than 2 million per year. Honda shares did not respond to the announcement.

Honda announced last week that it would partner with GM to develop millions of affordable electric vehicles for North America and China, with production planned for 2027.

Battery supply is a growing concern for Honda as automakers around the world scramble to secure inventory to boost production. “How they source EV batteries is much more important than how much they invest in EVs,” said Sanshiro Fukao, senior fellow at the Itochu Research Institute.

As the company catches up with global competitors, “Honda under Mibe is increasingly moving away from in-house production and recruiting battery suppliers should be the top priority for any automaker today,” he added.

The Japanese automaker said it would use GM’s Ultium battery in North America, and it is considering forming a joint venture with another unnamed player to make batteries for use in electric vehicles.

In China, Honda will source batteries from CATL, the world’s largest global battery group, while in Japan it will purchase batteries from Envision AESC, the Renault-Nissan Alliance’s main battery supplier, for commercial compact electric vans.

Seiji Sugiura, a senior analyst at consulting firm Tokai Tokyo Research Institute, said while the announcement showed Honda’s commitment to electric vehicles, “the stock market is still skeptical.” Honda defies electric vehicle mania and relies on hybrid cars

Adam Bradshaw

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