Honda’s Car Troubles Began Long Before Its Disastrous Bet on EVs

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Break With Tradition

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Chief Executive Officer Toshihiro Mibe broke with Honda’s long history as an internal combustion engine whiz — in cars, motorcycles, boats, lawn movers and generators — in an effort to reinvent the company as an electric motor powerhouse by 2040. His vision of initially achieving 40% EV sales by 2030 — later revised down to 20% — is now in tatters. 

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Mibe held out hope for EVs long after most of Honda’s peers had shifted gears. 

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General Motors Co. was one of the first established automakers to commit to an all-electric future back in 2021, but was also one of the first to tap the breaks when demand slowed. 

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During an aborted partnership with GM, Honda had an early indication of lukewarm demand for EVs in the US. It launched the Prologue EV in 2024, a model built in a GM factory using that Detroit-based automaker’s battery technology. 

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Sales of that car last month came to 1,067, down 64% from a year ago — due largely to the loss of US federal subsidies in September.

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But as recently as earlier this year, Honda doubled down on its commitment to electric batteries by buying out partner LG Energy Solution Ltd.’s stake in a new $4.4 billion plant in Ohio. That came even as Ford and Stellantis NV, which makes the Jeep and Ram brands, were pulling out of similar ventures. 

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While Honda’s EV capitulation came late, it had already begun to rethink its approach to the car business.

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In a sign of that broader reset, Honda quietly announced in February it would reverse an organizational change made six years ago under Mibe’s predecessor, Takahiro Hachigo, that separated vehicle development from advanced R&D. This restructuring move puts vehicle development back under the control of its R&D unit, a tacit admission Honda has lost focus on delivering innovative cars and trucks.  

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“Through this change, Honda R&D will be further advanced as an R&D organization capable of continuing to create compelling products, through which Honda will further increase its competitiveness,” it said. 

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Chasing Sales Targets

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The slow decline of Honda’s car operations can be traced back more than a decade to a time when management was fixated more on volume and variety than product quality or capital efficiency. 

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In 2012, then-CEO Takanobu Ito set an audacious goal of doubling annual sales to 6 million vehicles within five years. To do that, it built factories in China, Indonesia and Thailand, and accelerated production development to meet the target, which in turn placed pressure on its engineers and led to a series of recalls and botched vehicle launches. 

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While Hachigo, who succeeded Ito as CEO, shifted the focus away from chasing sales targets, Honda never recovered its mojo even as rivals such as Hyundai Motor Co. and BYD began taking away market share. The Tokyo-based company’s global sales volume peaked in 2019 at 5.32 million vehicles; it expects to sell 3.3 million in the fiscal year ending this month, down from last year’s 3.7 million.

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That has left Honda in a weaker position to absorb other blows, ranging from President Donald Trump’s tariffs on cars imported into the US to a glut of vehicles and price deflation in China. Bernstein notes Honda’s Chinese sales have declined for 24 consecutive months. 

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Mibe told reporters that Honda will make other changes as part of its EV reset. The board will detail plans of that broader overhaul in a revised business plan expected to debut around the same time it announces full-year financial results in May.

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