Under Honda CEO's radical vision, will company be recognizable in 20 years?

TOKYO — Honda Motor Co. has long thrived on a reputation for stubborn industry independence, cutting-edge engineering and — perhaps most of all — near-bulletproof engines deployed in everything from airplanes and race cars to lawnmowers.

But today's satisfied driver of a Honda Civic or Acura NSX may hardly recognize the Japanese automaker in 20 years under a radical revolution being led by recently installed CEO Toshihiro Mibe.

If his transformation succeeds, Honda Motor Co. will take a page from Elon Musk's SpaceX and start making rockets. Honda will drop its long-standing aversion to tie-ups with other companies and possibly combine with new partners, even tech companies outside the automotive world.

Honda will also ditch its famed combustion engines for full-electric or hydrogen fuel cell systems. And in this divergent future, Honda — following an industry trend — may even sell fewer vehicles than today, as the business model shifts to shared mobility, from individually owned cars.

In an interview with Automotive News, Mibe conceded his vision plots a challenging path. But change, the new boss said, was the only way to survive in this tough new era.

"Honda will not be an automotive company anymore," Mibe bluntly summed it up.

Mibe, 60, described by those who know him as a free-thinking, open-minded leader with a sense of his own place at a turning point in the company's history, isn't afraid to break the mold.

He is convinced that Honda, as one of the world's top producers of combustion engines and — as a result — of carbon emissions, has a social responsibility to refocus on carbon-neutral enterprises.

"That is the main aim," Mibe said at Honda Innovation Lab Tokyo, which is housed in a downtown high-rise and works on connected, digital and artificial intelligence projects.

"I have a concrete image of beyond 2030 — the social structure will be changed, not only for automobiles but also for other areas," he said. "The business model itself has to change."

With his vision stretching some two decades into the future, Mibe won't be around to see it to fruition. But outsiders say his ambitious revamp has reignited a spark of urgency and innovation at a company that still prides itself on engineering feats such as the CVCC engine.

"Honda's mojo is coming back," said Takaki Nakanishi, head auto analyst at Nakanishi Research Institute in Tokyo. "Whether Mibe can do it or not is one matter. But he has made the commitment to try. And that is what is different from other Japanese auto leaders."

Sustaining Honda's long-term viability is a top priority for Mibe.

The new boss took the wheel on April 1, and he is already easing away from the headstrong corporate independence that a parade of predecessors in the CEO office long deemed sacrosanct.

Honda is the only Japanese auto company still clinging to independence, as compatriot automakers coalesce into two blocs centered on Toyota Motor Corp. and Nissan Motor Co. But as a midsize player on the global stage, Honda needs the help of friends, Mibe concedes.

For the time being, that means circling its wagons with General Motors on a range of projects, from hydrogen fuel cell technology to electric vehicles. But whereas previous Honda heads adamantly ruled out corporate cross-shareholdings with GM or anyone else, Mibe said he is open to any partnership that brings value and a competitive edge — corporate ego be damned.

"I'm not simply hung up on maintaining independence," he said. "It is not 'independence first.' "

Mibe cited partnerships with information technology companies and even entertainment companies as ideas worth exploring as Honda seeks new businesses.

"If holding shares becomes necessary as part of that, then we would need to consider that, too," Mibe said. "If we look at Honda now, can we do everything by ourselves? Unfortunately, the answer is no. So I will be considering the possibilities of an alliance or alliances.

"I must say I am already thinking about that," he said. Honda is not in talks with Apple, he notes.

The mantra of Honda's transformation, Mibe said, is going carbon neutral. That is another big departure, especially for a veteran engineer who rose through the ranks at Honda as an internal combustion guru who developed some of the company's most renowned engines. Going forward, Mibe is trying to divine what kind of businesses will flourish in a carbon-neutral world.

Mibe, tall and lean, bears a youthful countenance and confident command of English. He brings an international outlook and willingness to try new things, which stems partly from his longtime role as Honda's top liaison with GM.

"He sees the shift to electric as partly social responsibility. But he also sees it as a great business opportunity," said one Japan-based auto executive from outside Honda who has worked for years with Mibe. "He's definitely cut from a different cloth from his predecessors at Honda. He's very open-minded. He speaks his mind and dares to be different."

Mibe proved that less than a month after taking the helm. In late April, he surprised the industry by announcing that Honda will go completely gasoline-free by 2040, dropping internal combustion from its lineup in favor of full-electric or fuel cell vehicles. Despite its budgetary and scale constraints, Honda is so far the only Japanese automaker to join the growing international trend of automakers making concrete timelines to go all-electric.

The transformation means forsaking the immeasurable brand equity and priceless intellectual property Honda has amassed over more than a half-century of perfecting the internal combustion engine.

But it could also mean a bumpy transition for workers.

More than 2,000 Honda employees in Japan applied for an early-retirement program meant to clear the ranks of older workers as the company shifts toward newfangled technologies that require newfangled skills. The program, reported by Japan's Nikkei business daily, was the first such buyout plan from Honda in 10 years.

Mibe said Honda's brain trust of engineers can adapt, regardless of the technology.

"The best asset that we have is not the engines themselves, but the human resources that have been building those engines. The people who have been producing the current engines are being reassigned to fuel cells or solid-state batteries and the like," he said.

"The human resources that have been producing engines will just have to change focus."

Despite Honda's daring EV road map, the company has been quiet on details such as investment figures. Global competitors including GM, Ford Motor Co., Volkswagen and Hyundai Motor Group have outlined plans to invest billions of dollars in their EV ambitions.

Even Japanese rival Toyota, itself a slow mover on full electrics, said in September it will plow nearly $14 billion into battery development through 2030. And Nissan just opened a line that is part of a $292 million outlay for a Japanese EV hub.

Honda will need a flood of funds to sustain its own transition.

Japan's No. 2 automaker is planning to introduce its own dedicated EV platform, called e:Architecture, and solid-state batteries in the second half of the 2020s. At the same time, it is developing autonomous vehicles, in part with GM's Cruise, under a mobility-as-a-service enterprise.

In September, Honda said it will branch into electric vertical take-off and landing aircraft with the aim of commercializing them by 2030. Then it will break the bonds of Earth altogether by developing small, reusable rockets that can put satellites into low orbit. Honda confirmed this month that it has conducted combustion tests of its prototype rocket.

Another new focus area will be avatar robots — machines with arms, hands and fingers that motion-capture real human movement to "make virtual mobility possible."

"This is a necessary decision to make sure Honda exists sustainably into the future," Mibe said.

Mibe said the grand plan is still taking shape. But Honda may announce fresh details, such as product and battery strategies for North America, in early 2022, he said.

In China, Honda has already provided a glimpse. In October, Mibe announced that Honda will introduce 10 EV models in China in the next five years under a new "e:N Series" brand. Honda even envisions exporting these models from China. To underscore its intentions, Honda showed three EV concept vehicles with angular styling, slablike sheet metal and sharp boatlike prows.

How much will the global EV overhaul cost?

"All I can say is billions and billions," Mibe said.

Honda's ramp-up will take off in the late 2020s, following the arrival of solid-state batteries. That technology will be a "game-changer," he said.

In a sense, Honda is refraining from big investments in today's lithium ion battery technology on the bet that the solid-state breakthrough is right around the corner.

Honda plans to build a pilot line for solid-state batteries in 2022 as a step toward mass production, Mibe said. In the meantime, Honda's partnership with GM can be seen as a bridge to that era, helping Honda fill the gap with EVs until its own next-gen tech is ready.

"If we make too huge an investment, we feel the production facilities can't be readily commonized between lithium ion and solid-state batteries," Mibe said. "So we need to think long term and think about what timing is best for this investment of billions and billions."

But one thing Honda likely won't detail anytime soon is a long-term vehicle sales target.

Honda sold 4.55 million vehicles worldwide in the fiscal year ended March 31, 2021, and expects deliveries to drop to 4.2 million in the current fiscal year as the global semiconductor shortage affects output. The automaker wants 40 percent of its sales in major markets, such as North America, to be either full-electric or fuel cell vehicles in 2030, and the world fleet to be zero emissions in 2040.

But Mibe says value will hinge on new mobility models and software, not necessarily volume.

"In general, the absolute number of vehicles may decline because of sharing. I don't think we can maintain the absolute number of vehicles out there," Mibe said of the industry's direction.

"We definitely have to change the current automobile business model itself," he said. "That is why we are not publishing a numerical target. The profitability structure will change as well."