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Honda accelerates along EV road under new CEO Mibe

Japan carmaker confronts investment and regulatory challenges

Honda CEO Toshihiro Mibe attends a news conference in Tokyo on April 23. The company is expanding its electric vehicle targets. (Photo by Tetsuya Kitayama)

TOKYO -- Honda Motor is accelerating its rollout of electric vehicles, responding to regulatory and consumer pressure to step away from making traditional gasoline-powered cars and compete with the likes of Tesla Motors.

Toshihiro Mibe, who took over as Honda's CEO on April 1, said on Friday that by 2030 40% of the Japanese carmaker's vehicles in major markets will be powered solely by electric batteries or fuel cells -- EVs and FCVs. By 2035, Honda expects to double this percentage to 80% and by 2040 all its cars globally will be either EVs or FCVs.

Honda will be 100% electric in Japan by 2030, Mibe said -- though this includes so-called hybrid vehicles which combine electric and traditional motors.

"It is indeed very challenging," Mibe said at a press conference Friday unveiling the targets. "But we have decided to share our vision throughout the value chain and set high goals."

He said launching EVs that are practical for consumers is crucial for mass-adoption.

Honda will spend a total of 5 trillion yen ($46.3 billion) on research and development in the coming six years, Mibe said. He also implied the possibility of restructuring its global production lines, as EVs require fewer components than conventional vehicles.  

The ambitious strategy shows how Japanese carmakers are increasingly betting on EVs, having previously lagged other global manufacturers. 

Last October, former chief Takahiro Hachigo said the company would aim to achieve carbon neutrality by 2050. Honda launched the Honda e model last year in Japan and Europe as its company's first mass-produced EV, but it plans to sell only 10,000 units in Europe and 1,000 in Japan a year -- a tiny fraction of the company's unit sales of around 5 million.

"Honda presented a very bold strategy, but making these electric targets convincing is their next step," said Seiji Sugiura, a senior analyst at Tokai Tokyo Research Institute, adding that Mibe still has to give concrete plans for model lineups and what will happen to the company's conventionally-powered cars.

Kazuo Shimizu, a motor journalist and former race car driver, believes Honda was able to unveil this ambition because of its smaller scale compared with Japanese rival Toyota Motor.

Toyota, whose strategy has long embraced hybrid vehicles, took a significant step toward a more all-electric line-up on Monday, announcing plans to launch 15 EV models globally by 2025, but overall this is a minority of its total of around 300 models.

Mibe laid out Honda's strategy in his first press conference since being introduced in February as the successor to Hachigo.

Mibe, whose background is in developing engines, has led the company's recent electric initiatives, in particular Honda's strategic alliance with General Motors. On Friday, Mibe said new EV models using a Honda-led new platform will be launched in the second half of this decade in North America.  

Last April, the two automakers announced they would jointly develop EVs and produce them at a GM plant in North America. Five month later, they said they would enhance collaboration and share auto parts including platforms. 

While the two automakers have worked together since 1990s on next-generation technology, including fuel-cell vehicles and EV batteries, expanding their partnership to include key components was seen as a turning point for Honda, known for embracing in-house development.

Although this partnership caused some internal conflict within Honda, what Mibe has achieved with GM "makes sense, as Honda wanted to reduce development costs for electrification in order to ensure profitability," said Sugiura. Honda's profitability for its North American car business declined to 3.6% in fiscal year through March 2020 from 6% in fiscal 2011.

In 2016, Hachigo unveiled a target for electrified vehicles to account for two-thirds of Honda's global sales by around 2030. But this was mostly based on hybrid vehicles. All-electric and fuel-cell vehicles were planned to account for only 15% in total.

Pressure for de-carbonization has increased since then. Investors are increasingly favoring EV companies while authorities around the world are tightening their environmental regulations. Japan has a strategy to achieve carbon neutrality of the automotive industry by 2050, while multiple countries are set to ban sales of new gasoline cars, including hybrids.

Hachigo has given Mibe a platform to accelerate Honda's EV plans by shoring up the business since he took charge in 2015.

He led various reforms, including rationalizing global production capacity and pulling the company out of Formula 1. He also oversaw the absorption last April of Honda R&D, a research entity once headed by founder Soichiro Honda. The auto business's operating margin improved to 4.7% for the latest October-December quarter, compared with 1.3% a year earlier.

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