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The Nikkei View

Honda exit from gasoline engines highlights dawn of EV era

Industry must adapt to structural changes driven by Chinese automakers

A Honda e electric car is displayed at the Brussels Motor Show in January 2020. The automaker plans to stop selling gasoline-powered cars worldwide by 2040.   © Reuters

Honda Motor has announced that by 2040, every new car it sells will be either an electric or fuel cell vehicle.

In other words, the automaker will halt the production of internal-combustion engines. We commend the bold decision to accelerate the shift toward a zero-carbon future.

The history of the gasoline-powered car goes back to Germany in the 1880s. Founded after World War II, Honda was a relative newcomer in the field. But it joined the ranks of the world's leading automakers in 1972 with its low-emissions Compound Vortex Controlled Combustion engine.

As exemplified by its success in Formula One racing, technical prowess in gasoline engines has always underscored the Honda brand.

That Honda is ditching this core identity shows just how seriously automakers view the need to adapt to carbon neutrality. It is a matter of survival.

Chinese automakers have been ahead of the curve in anticipating this shift.

The Shanghai International Automobile Industry Exhibition in April showcased a number of groundbreaking electrics. One of the most popular booths belonged to SAIC-GM-Wuling Automobile. The subsidiary of state-owned SAIC Motor launched last year the popular Hong Guang Mini EV, which starts at just 28,800 yuan ($4,450).

Though Chinese automakers have been acquiring technical know-how through local joint ventures with Japanese, American and European partners, they had struggled to catch up in the field of gasoline vehicles, which are structurally complex. Now, Chinese automakers have become a formidable force in electrics, which are built more simply and require significantly fewer parts. For automakers in China, the world's largest auto market, producing a smaller number of parts in mass has meant greater economies of scale.

Like iPhones, cars will be designed in one place and built in another

The shift toward electrics has led to a division of labor between the design and development of a vehicle, and its production. This trend is already seen in the computer and smartphone industries.

For example, courier service Sagawa Express plans to electrify its entire fleet of more than 7,200 minivehicles in Japan by 2030. But the Japanese startup supplying the vehicles to Sagawa will handle only the design process in-house, with production contracted out to China's Guangxi Automobile Group.

For Japan, whose edge in automobiles has always been the skill to blend together the roughly 30,000 components of a car, electric vehicles threaten to erode the country's competitiveness.

The rise of electrics could also upend the industry pyramid, in which automakers at the top are supported by massive numbers of suppliers. With so many jobs at stake, Japanese automakers have the responsibility to articulate their future plans.

Electrics have their own issues. Japan and China both depend heavily on fossil fuels for energy. This raises the question of how environmentally friendly electrics truly are after accounting for emissions produced by generating their electricity.

Reserves of critical minerals used in electric-vehicle batteries and motors are concentrated in a handful of countries, and securing adequate supplies can pose problems for resource-poor countries like Japan. There have been accusations of child labor in the process of mining cobalt, which is used in batteries. Honda needs to speak up and take action on these social issues as well.

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