understand? It’s not an easy time for a legacy automaker to sell electric vehicles, with incentives fraying and Chinese automakers knocking on the door. But Honda takes it to another level.
This week, Honda killed its inconsequential—and frankly unanticipated—EV programs. What little incentive Honda had to compete in the EV arena is apparently gone, and with it, any chance of surviving the current wave of upheaval sweeping the industry.
The company blames US tariffs and Chinese competition, two easy targets. But it never really had a viable EV strategy to begin with.
Honda kicked things off Thursday by halting development of the electric Acura RDX and the Honda 0 sedan and SUV, three models that were the company’s first electric vehicles — but about which very little was shared with outsiders. Continued Friday, with Automotive News reference that Honda was going to stop production of the Prologue, a vehicle that was essentially designed and built entirely by GM.
The decision could fail in many different ways, but there are two that I would argue are most important. By positioning itself for electric vehicles, Honda will be far behind two of the biggest changes sweeping the auto industry: electric powertrains and software-defined vehicles.
Lost opportunities for EVs
For Honda — and for many traditional automakers still early in the transition — an EV is just a car with a different powertrain. I can imagine Honda execs thinking they can wait out the awkward transition period and, once the engines and batteries are fully sorted, just swap out the fossil fuel bits. How hard could it be?
This is wrong, of course. Many automakers have found that throwing batteries into a car originally designed for an internal combustion engine doesn’t work so well. It may shorten the development cycle, but the resulting product ends up being heavy, inefficient and more expensive to produce.
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When developed as a concept product, EVs offer automakers the opportunity to rethink the car and make it cheaper in the process.
Take Ford for example. The Mustang Mach E was a sales success, but not a financial one for Ford. The Mach E is based on a heavily modified version of the platform that also underpins the Escape, a fossil fuel crossover. Part of the problem, Ford CEO Chris Farley said in one recent interviewwas that legacy engineering decisions held the product back: the Mach E’s wiring is 70 pounds heavier than the Tesla’s, for example. Small errors like this add up to a product as complex as a car.
Honda will also miss out on several learning opportunities. There is learning by doing, both in development and in construction. We are also learning to cultivate new suppliers and supply chains. It will also miss out on getting critical feedback from customers – what do people really value in their electric vehicles?
Sayonara, software-defined vehicles
Here, Honda is setting itself up for failure in the second upheaval sweeping the auto industry: the software-defined vehicle (SDV), which has basic capabilities that can be upgraded and improved over time.
Consumers, especially those who buy electric vehicles from the likes of Tesla, Rivian and BYD, are used to frequent updates, smart infotainment software and advanced driver assistance systems from Tesla, Rivians, Nio or Xiaomi. Honda has yet to make significant progress in any of these areas.
SDVs don’t have to be EVs, but they tend to go hand in hand. The large battery in an EV makes it easy to power powerful computers and allows things like over-the-air updates to happen when the car is parked and “off”. Could Honda make a fossil fuel SDV? Sure, but it’s unlikely for the same reason it’s retreating from EVs: the old way of doing things is easier and more profitable, for now.
What does Honda mean?
Honda is facing an identity crisis. At its core, it is an internal combustion engine company. It makes very good engines and that is starting to play a less and less important role.
Other features of its cars are also under attack. For years, the company has prided itself on building driver’s cars. They are light, efficient and handle well. But when the car drives itself, what does a “driver’s car” mean?
Range aside, I’d argue that the market for a driver’s car is limited anyway. People are attracted to Honda because they are reliable and reasonably priced. The fact that they handle well is the icing on the cake, perhaps helping consumers bridge the gap if they’re torn between two brands.
However, EVs promise to be significantly more reliable than fossil fuel vehicles, and as Chinese automakers show, once battery prices drop, so do the overall cost of vehicles. If Honda can’t compete on reliability or price, consumers will hesitate.
This seems to be happening already in China. Honda said as much inside recent earnings report. “Honda has been unable to offer products that offer better value for money than those of newer EV manufacturers, resulting in a drop in competitiveness,” the company said. Headwinds in China contributed to the company’s nearly $16 billion in losses last year. With no plan for electrics, it’s only a matter of time before Honda meets the same fate elsewhere.
