The All-New, All-Electric Honda Prologue is on display at the 2023 Los Angeles Auto Show at the Los Angeles Convention Center on November 24, 2023 in Los Angeles, California. While missing a host of brands, this year’s edition of the Los Angeles Auto Show debuted a range of new models.Â
Josh Lefkowitz | Getty Images News | Getty Images
As the auto industry attempts to time its years-long, sprawling shift away from combustible engines to electric vehicles, some legacy car makers are playing up hybrids as a waystation along what is now more likely to be framed as a decades-long path. But at least one automaker says it is ramping up its North American EV strategy in 2024: Honda Motor Company.
This spring, there has been a flurry of announcements from the Japanese company, including an $11 billion investment in a Canadian EV hub — the company calls it a “comprehensive EV value chain” — and an EV transformation of Ohio operations.
Honda’s EV moves come against the backdrop of EV pullbacks from other major auto manufacturers; and in some cases, shelved EV plans altogether. GM said it no longer will provide EV production targets so it can build to market demand, while Ford said it would delay about $12 billion in EV investments.
“Each manufacturer has their reasons for their direction,” said Bob Nelson, executive vice president of American Honda Motor Co.
Even as Honda commits more to EVs, its investment approach implies a hedging of bets. Nelson says a $700 million investment in creating the EV operations in Ohio gives the company latitude to tailor production to market conditions.
“The $700 million investment gives us the flexibility to produce ICE [internal combustion engine] and BEV [battery electric vehicle] on the same line. We think that is a smart strategy as the market continues to grow,” Nelson said.
It’s also being designed to build expertise, efficiencies and knowledge that can be shared across all of Honda’s North American operations, including engineering and purchasing, and potentially around the world. “Having all of those functions and experience here gives us the ability to develop the capabilities, standards, and profits for EVs, which we will use throughout the world as we expand our EV footprint,” Nelson said.
He added that Honda is on track to achieve its goal of having 80% of its vehicle lineup be EVs by 2035 and 100% by 2040.
Critics say Honda already late to EV transition
Some industry analysts say that Honda’s more aggressive short-term EV plan is simply a reflection of its need to play catch-up.
“They are catching up and getting into the game for sure,” said Cliff Banks, founder of the Banks Report, which analyzes automotive trends.
Other automakers, meanwhile, are pulling back because of limited customer engagement and cost.
“Auto manufacturers have seen that the costs are really expensive in trying to bring viable EVs to the market,” Banks said. “Basically, what they are doing is rebuilding the airplane while still flying it. Honda will feel that same cost pressure moving forward; I’d not be surprised to see them back off.”
It’s a confusing market for automakers to time perfectly.
“As we make this transformation, it’s going to happen over decades. And that’s why I couldn’t be more proud of our gas-powered fleet as well,” GM CEO Mary Barra recently told NBC News. A GM spokesman quickly followed up to say the company is actually aiming to exclusively sell electric vehicles by 2035. GM recently began shipping its first mass-market, all-electric crossover, a version of its popular Equinox model, to dealers.
As the EV market stalled, and prices dropped, recent sales have improved. Sales of Ford’s lineup of EVs, and also hybrids, surged in May, showing how tough it is for automakers to forecast this evolving, and high investment cost, market in the short-term.
Banks noted Honda has made splashy announcements in the past that have not come to fruition, pointing to a planned roll out of EVs with GM that never got off the ground. Regarding Honda’s plans to produce 240,000 EV units in Canada, Banks said, “We’ll see.”
“I think there will be some short-term changes along the way, but we are still early into this transition to battery-powered electric vehicles,” Nelson said. Honda is talking up hybrids, too, with Nelson, adding that hybrid models like its CR-V is a good “transition car” to get consumers into the EV world.
An unsettled, if not chaotic, electric vehicle market
Some industry analysts view Honda’s EV strategy as more than just cosmetic, if maybe more opportunistic than unique in its long-term plan.
Cars.com editor Jenni Newman said Honda can fill a void as other automakers scale back.Â
According to Kelley Blue Book’s latest survey, Tesla, long the EV market leader, saw its market share fall to 51.3% during the first quarter, down from 61.71% last year.
The arrival of competitors has left the market unsettled. “It is not chaos, but it is close. Tesla has decreased prices on their new cars, which has impacted the used car side,” Newman said.
Meanwhile, well-established OEMs like Honda are coming in with their own EVs, along with upstarts like Rivian, which just redesigned its all-electric R1 pickup and SUV models to improve range, performance and computing power using Nvidia chips.
“We do not know how it will all shake out,” Newman said.
GM itself is playing a key role in the first mass-market EV Honda is introducing, the Prologue. It uses the Chevy Blazer design, while Honda’s luxury brand, Acura, is basing its first EV on a Cadillac — both with added Honda-centric styles and features.
“This is not unusual in the automotive space; it is a way for them to jump in,” Newman says, likening it to Toyota’s collaboration with Subaru. Honda’s investment in Ohio will allow for ramping up of Prologue production.
The All-Electric Acura ZDX is displayed during the 2023 Los Angeles Auto Show at the Los Angeles Convention Center on November 24, 2023 in Los Angeles, California.Â
Josh Lefkowitz | Getty Images News | Getty Images
It’s difficult for automakers to make quick pivots because of the complex supply chains that feed into the entire automotive ecosystem. For Honda, being fully EV by 2040 is in line with other automaker transitions, which Newman described as “fairly fast” for all. “That is a long time for you and me, but for an automaker, that is the planning they have to do because of the scope of the industry and the globalization of the industry,” she said.
Honda’s plan to get to 100% zero emissions by 2040 relies on more than just EVs, too, with fuel cells in the mix as well. In a separate shift away from traditional auto technology, Honda and GM began to jointly produce hydrogen fuel cells as a diesel alternative this year. Honda has also ben ramping its hiring and construction at an Ohio plant formed by a $3.5 billion joint venture with LG Energy Solution in 2022, which will provide batteries for Honda and Acura EVs.
Honda could have a brand advantage
Honda has a trusted name with consumers to capitalize on at a time of doubts about EVs, among both consumers and carmakers. A survey this year conducted by Edmunds asked customers which brands they trust to make the best EV. Tesla finished first at 23%, followed by BMW at 13%, Toyota at 12%, and Honda at 8%. Ford rounded out the top 5.
Hyundai and Kia have done much more in the EV space but didn’t make it into the top five, noted Jessica Caldwell, Head of Insights at Edmunds. Toyota and Honda, meanwhile, made the cut among consumers even though they produce just one fully EV model (BMW produces five). “This sets Honda up well,” she said.Â
In April, Honda was the second fastest-selling mass-market car brand on Cars.com.
The market downturn, coupled with government incentives, are bringing EV prices into striking distance of traditional cars, but consumer sentiment over EVs still seems to have soured, or at least stalled. A Gallup poll of Americans in April found ownership of EVs increasing by 3% annually, but an equal percentage decline in consumers who indicated serious interest in buying an EV, down from 12% to 9%. Overall, 35% of Americans said they might consider buying an EV in the future, down from 43% last year.
Roadblocks will remain, even for EV manufacturers like Honda that score high in surveys, and not only the tangible issues of affordability, improving battery life, range, and charging station availability. Another big hurdle is political. “There is a portion of the public that has decided that EVs are just not for them,” Caldwell said. “They have made their mind up, they don’t support it. It is almost like a political standpoint, so it doesn’t matter how good the vehicles are.” Edmunds surveys show a partisan divide, with Republicans less inclined than Democrats to buy an EV or support the transition more broadly. “Automakers have to overcome this,” Caldwell said.
For Honda, brand is an advantage it would not want to wait too long to attempt to capitalize on in EVs. In the least, “they need to get into the conversation,” Newman said.