Honda scraps EV models and braces for first loss since it went public
Honda $HMC will cancel development and production of three electric vehicles it had planned to build in North America, the company announced Thursday, as it reevaluates its strategy in the face of weakening demand for electric vehicles and pricing pressures.
The three models canceled are the Honda 0 SUVs, Honda 0 sedan and Acura RSX. Honda said proceeding with launches in the current environment – where demand for electric vehicles is falling – would likely compound losses over time.
The move will result in Honda posting its first annual net loss since the company went public in 1957, according to the New York Times. The total cost of the strategic reversal, including write-offs, asset write-downs and cancellation-related expenses, could reach 2.5 trillion yen — about $15.7 billion — in this fiscal year and future periods, the Times reported. Honda also expects to recognize a loss in value on equity-accounted investments in China.
Honda cited several forces behind the decision. In the United States, removal of incentives for electric vehicles and relaxation of emissions regulations have slowed market growth. In China, the rise of software-defined vehicles from new domestic manufacturers has eroded Hondathe competitive position of . American pricing policies have further reduced the profitability of its gasoline and hybrid range.
“In the United States, the expansion of the electric vehicle market has slowed due to several factors, including the easing of fossil fuel regulations and revised incentives for electric vehicles,” Honda said in a statement.
In the future, Honda said it would shift its resources toward hybrid models and work to reduce its fixed cost base. Future electric vehicle projects will take place over a longer timeline, depending on market conditions and profitability. The company said it plans to provide more details on its revised mid- and long-term strategy at a press conference in May.
Honda joined Ford $F, GM and Stellantis $STLA – the maker of Chrysler and Jeep vehicles – to absorb significant financial difficulties related to delayed or canceled electric vehicle programs.
In a move linked to the revised financial outlook, HondaThe President and Executive Vice President will lose their short-term performance bonuses for the current fiscal year. Several other senior executives will voluntarily return part of their monthly remuneration for three months. The company said the annual compensation of its top executives would decrease by approximately 25% to 30% compared to standard levels as a result.
Honda said it has no plans to revise its dividend forecast for the current financial year despite the earnings revision.
