TOKYO – Honda CEO Toshihiro Mibe admits falling behind in the global race for electric vehicles. Now he is outlining a sweeping strategy to “fight back” and rekindle Honda’s mojo.
Honda's radical revamp hinges on new models, better batteries, powerful software and a totally transformed driver interface, along with dedicated EV factories and a completely overhauled production system being developed by one of the world's most innovative manufacturers.
It also involves a newly secured supply of semiconductors, the lifeblood of tomorrow’s cars.
Mibe pledged the worldwide reboot will shift into high gear from 2025, in two short years.
The CEO outlined the vision on Wednesday while giving Honda’s annual business briefing. Mibe said Honda executives had an unpleasant surprise at this month’s Shanghai auto show.
Local Chinese brands flooded the exhibition hall with sophisticated, advanced EVs of all kinds.
As COO Shinji Aoyama put it, “We were overwhelmed by the Chinese.”
Mibe said Chinese EVs had made big strides during the COVID-19 pandemic when the world was largely cut off from the country by travel restrictions and quarantine measures.
“They are ahead of us, even more than expected,” Mibe said.
“We are thinking of ways to fight back. If not, we will lose this competition,” he said. “We recognized we are slightly lagging behind, and we are determined to turn the tables.”
The doubled-down ambition is part of Honda’s bigger plan to ditch internal combustion by 2040 and sell nothing but full-electric and hydrogen fuel cell vehicles by then.
Along the way, it plans to have production capacity in place to sell some 2 million EVs and fuel cells globally in 2030.
In the meantime, Honda will milk its existing gasoline and hybrid vehicles for all the profits it can and channel the funds back into developing EVs and other technologies of tomorrow.
“We will strive to generate a business structure that generates earnings even in the EV era,” Mibe said. The goal is a 7 percent return on sales in the near term and higher than that from 2030.
“We believe it is important to aggressively reinvest free cash flow from our internal combustion business, including hybrids, into areas linked to our competitiveness in future electrification.”
2025 turning point
Honda’s fight-back kicks in from 2025.
That is when Honda launches its in-house dedicated EV platform in North America for mid- to large-size EVs. In China, Honda unveiled four new EV models at the Shanghai show and said it would phase out gasoline cars by 2027 on its way to offering only EVs there by 2035.
Furthermore, from the 2026 model year, Honda’s upcoming EVs will also be equipped with a new automotive operating software that Honda is developing internally.
The software will enable a new user interface for drivers and passengers.
In fact, Honda appointed its first “global UX officer” from April 1 to make the interiors of Honda cars more like smartphones. The new hire is Yokichi Koga, CEO of Drivemode, a Silicon Valley-based software startup that Honda bought in 2019 as part of its plunge into digital mobility.
The goal is offering new software services and applications that can rake in new revenue.
“The business model itself is totally different from what we have right now,” Mibe said.
In the past, automakers mainly made money off the one-time sale of the hardware; volume was king. Going forward, Honda will keep selling services over the entire lifetime of the vehicle. Volume alone will not guarantee success; additional services must be provided over the long run.
“We have to think about long-time value and developing that into our business,” Aoyama said.
To power all that software, Honda has also entered a partnership with Taiwan Semiconductor Manufacturing Co., or TSMC, the world’s largest microchip maker.
That will help guarantee a steady supply of chips in the mid- to long-term, helping to avoid shortages like the one that crimped car output across the industry over the last couple of years, Mibe said.
Batteries and beyond
Critical to the push is a slew of next-generation batteries under development. In the second half of the decade, Honda plans to bring to market three new types of batteries:
- A next-gen liquid lithium ion battery
- A semi-solid-state battery
- An all-solid-state battery
The next-generation lithium ion battery technology is being developed with Japanese battery maker GS Yuasa. It will have higher capacity and higher output than today’s batteries.
The two solid-state varieties will deliver further improvements in safety and performance.
The semi-solid-state packs are being developed with a Boston-based company called SES Holdings. The all-solid-state ones are being developed in-house by Honda.
Honda starts a demonstration line for those batteries next year at a plant in Tochigi, north of Tokyo.
“The most important factor in electrification is battery competitiveness,” Mibe said.
When it comes to factories, Honda will also need new dedicated EV plants by the decade’s end.
In the U.S., for example, Honda is positioning a clutch of factories in Ohio as its local EV manufacturing hub. But those operations leverage existing facilities.
Looking ahead, Mibe said Honda needs specialized EV factories geared to its new EV platforms and to new, more efficient ways of making EVs. Expect those around the time volumes approach 2 million vehicles in 2030. The production engineering is being done in Japan, but the new factories will be set up in various regions, timed to the cadence of new EV model releases.
“It will be totally different from a conventional automobile production line,” Mibe said.
Honda said last year it would invest 5 trillion yen ($37.32 billion) over the next 10 years in electrification as it rolls out 30 full-electric vehicles globally and builds production capacity for 2 million EVs annually by 2030.
The 2 million EVs and fuel cell vehicles Honda will be prepared to produce in 2030 represent about 40 percent of its 5 million global output plan that year.
