Honda Revises Electrification Strategy: Investment Cut and Shift Toward Hybrid Vehicles

According to reports on May 20, Japanese automaker Honda Motor has announced an adjustment to its global electrification strategy in response to the slowing growth of the U.S. electric vehicle market and changing consumer preferences. The company will reduce its planned electrification investment for fiscal year 2031 from 10 trillion yen to 7 trillion yen, a 30% decrease, while placing greater emphasis on the development and production of hybrid vehicles. This strategic shift aims to enhance energy efficiency by upgrading existing internal combustion engine platforms.

As part of its North American operations, Honda will upgrade its Marysville Auto Plant, East Liberty Auto Plant, and Anna Engine Plant in Ohio to create an integrated facility for producing both electric and hybrid vehicles. This facility is expected to commence production of pure electric vehicles based on the “e:Architecture” platform in 2026, alongside strengthening localized hybrid system manufacturing capabilities. Honda highlights this approach as a means to balance market demand with supply chain flexibility and to ensure the coordinated advancement of both traditional and electrified vehicle lines.

Although merger negotiations with Nissan and Mitsubishi have ended, the strategic cooperation agreement signed in August 2024 remains valid. Honda will continue collaboration with Nissan and Mitsubishi in battery technology, autonomous driving, and software development. Notably, Honda plans to incorporate Huawei’s intelligent driving solutions in select models and is partnering with Renesas Electronics to develop high-performance chips to bolster competitiveness.

Market data indicates that U.S. electric vehicle sales in the first quarter of 2025 grew by only 2.7%, a significant decline compared to 47% growth in the same period last year, with EVs accounting for 7.1% of total vehicle sales. Consumer concerns regarding driving range, charging infrastructure, and high insurance costs persist as major barriers to wider EV adoption. In this context, several automakers, including Volvo and Toyota, have postponed their electrification targets, with Honda’s strategic adjustment seen as a pragmatic response to market conditions.

Despite these short-term adjustments, Honda remains committed to its long-term goal of achieving 100% global sales of pure electric or fuel cell vehicles by 2040. CEO Toshihiro Mibe described the current slowdown in electric vehicle sales as a "short-term headwind."