EV partnership with GM buys Honda time

TOKYO — Honda's reliance on General Motors in the global electric vehicle race may be as much about buying extra time as it is about forging true alliances.

CEO Toshihiro Mibe amped up Honda Motor Co.'s electrified ambitions this week, pledging to achieve production capacity of 2 million EVs in 2030 — or about 40 percent of its global total at that time.

It appears that Honda, a stubbornly independent automaker with a tradition of in-house engineering solutions, is now leaning surprisingly hard on GM to achieve its EV goals, especially in the critical U.S. market, Honda's biggest and most profitable. Honda will turn to GM for two all-electric large crossovers from 2024 and then a range of affordable EVs from 2027. And crucially, it will tap GM for its supply of batteries.

All this, from the company that pioneered the groundbreaking, efficient CVCC engine and birthed such legends as the Civic, Accord and NSX sports car on a reputation of innovative engineering.

But Mibe vows that Honda will return to that technological glory in the latter half of the 2020s. As he explained this week, Honda will have plenty of its own in-house resources on tap by then:

• An all-new dedicated electric vehicle architecture
• A market-ready solid-state battery technology
• A dedicated assembly line for making EVs in North America
• A newly developed software operating system for vehicles.

The only hitch for Mibe is time and money — and it will take a lot of both.

Honda said it will invest ¥5 trillion — nearly $40 billion — over the next 10 years in electrification and software. That is the lion's share of its entire $63.86 billion R&D budget over that period.

To help foot the bill, Honda last month issued U.S. dollar-denominated green bonds totaling $2.75 billion.

"We have a goal, and we just have to keep steadily working toward it," Mibe said.

That goal is to completely ditch internal combustion from Honda's lineup by 2040.

Honda's production target of 2 million EVs is smaller than the 3.5 million that Toyota is aiming for in 2030. But Honda is only half the size of Toyota, the world's largest automaker.

The man charged with leading Honda's overhaul is Senior Managing Executive Officer Shinji Aoyama, who led Honda's U.S. and North American operations until last October.

Teaming up with GM, and more recently Sony, is a bridge to that next generation of Honda developments. It is important for helping Honda boost scale, knock down cost and create technologies.

"I'm sure Honda wants to have its own EVs out there, but realistically, it's not going to have its own cars out there until later in the decade. They've blown EVs off too long," said Christopher Richter, lead Asia auto analyst at CLSA in Tokyo. "Their automotive division has been withering for years. Maybe it's a good [thing] they work with GM and other partners to reinvent themselves."

Honda's partnerships are part of a multipronged strategy that will unfold through the end of the decade. As Honda enters the 2030s, it will have three EV architectures underpinning a full lineup.

The mini and subcompact EV platform will be developed for Japan and the rest of Asia. In Japan, it will debut on commercial minivehicles.

• A midsize EV platform is being jointly developed with GM to reach scale in the millions.
• The third, the Honda-only e:Architecture framework, will underpin larger vehicles, especially products for North America and China, Mibe said.

"From 2030 and beyond, we believe we will be entering into the full popularization period, and battery EVs will be commonplace," Mibe said. "We will have small, medium and large-sized platforms in place and cover all the segments with these three platforms."

All told, Honda will launch 30 EVs globally by 2030, including 10 in China through 2027.

Honda also wants to launch two all-electric sports cars in the middle of this decade, Mibe said. One will be what he calls a "specialty" vehicle and the other a flagship model. Teaser shots of cars under wraps depict low silhouettes reminiscent of the Acura NSX, which will be discontinued this year.

While sharing development costs with GM is supposed to ease Honda's entry into the EV era, some analysts question the long-term business case of relying on joint programs.

"The U.S. is Honda's main battleground. But if they have to depend on GM there, I don't know how they are going to improve their margin," said Koji Endo of SBI Securities Co. in Tokyo.

But the return to in-house Honda technology ramps up in 2026 with the debut of the proprietary e:Architecture. The dedicated EV platform will support models slightly larger than the ones being prepared jointly by Honda and GM, Mibe said.

The architecture will run on a new operating system software being developed as Honda's answer to similar systems under development by Toyota and Volkswagen. The software will make use of over-the-air updates and lead to faster software-first vehicle development.

"After the year 2026, we will begin to shift to the new way," Mibe said.

The CEO said it is essential to develop the operating system internally — even though it eats up a lot of resources — to leverage Honda-unique services and data.

Eventually, competing operating systems may consolidate into a smaller set of systems that become industry standards, in the same way Apple and Google dominate smartphone software. But Honda is confident it can create superior software with staying power, Mibe said.

New batteries also will be crucial to the strategy.

To support 2 million EVs in 2030, Honda reckons it needs battery capacity of 160 gigawatt-hours. In the spring of 2024, it will spend $343 million to open a demonstration line for producing next-generation solid-state batteries.

The automaker wants to bring those lighter, energy-dense batteries to market late in the 2020s.

In the meantime, Honda will source Ultium lithium ion batteries from GM and explore other joint ventures for battery production locally in North America.

In China, it will partner with CATL, and in Japan, it will get batteries for a new series of mini EVs from Envision AESC, the battery-maker that also supplies rival Nissan Motor Co.

Honda will also leverage swappable batteries as part of its future power-pack strategy.

Mibe stressed that gasoline-electric hybrids will remain a key element of Honda's lineup well into the 2030s and that he expects demand for them to increase in some places.

"We will continue to rely on hybrids as one of our powerful weapons," he said.

But Honda, which sells about 4.5 million vehicles a year worldwide, has a long way to go before moving to full battery-electric vehicles.

Since marketing its first in 1997, the Honda EV Plus, the company has sold only 32,649 BEVs cumulatively. Almost half them, 14,324, sold in 2021 alone.

Honda has made a much bigger market dent with hybrids, a segment it helped pioneer with the Insight. It has sold 3.9 million hybrids cumulatively over the years, including 561,165 gasoline-electrics in 2021.

The limited-run EV Plus, a squat three-door microcar, was Honda's first EV, but the battery-powered version of the low-selling Clarity sedan was the first to be marketed in the U.S.

Today, its only global all-electric offering is the Honda e urban runabout, and it is not sold in the U.S. Honda sold 9,226 of the subcompact hatchbacks in Europe and Japan through the end of 2021, including 4,171 last year. The company also sells three locally focused electric models in the China market.

Naoto Okamura contributed to this report.