Honda CEO bets $40bn to reach goal of going fully electric

When Toshihiro Mibe took over as Honda Motor Co.’s chief executive officer last year, he did so with a bang, promising to achieve carbon neutrality by 2050 and phase out gasoline-powered car sales by 2040, becoming Japan’s first automaker to say as much.

Now, he’s backing that with numbers. Honda will spend 5 trillion yen ($40bn) on its push into electric vehicles (EV) over the next decade to introduce 30 EV models by 2030 with production volume of more than 2 million vehicles a year.

“We can no longer envision the future by drawing a straight line forward from our autos business as it exists today,” the CEO said in an interview with Bloomberg after unveiling his spending plans. “Within this broad-scope image, we’re making significant progress.”

Even so, electrification comes with “high hurdles” that Honda can’t overcome on its own, he added. That’s why Mibe, who ran the carmaker’s research division before becoming CEO, has largely abandoned Honda’s go-it-alone strategy when it comes to developing and selling EVs.

Last month, Honda announced it’s joining forces with tech giant Sony Group Corp. to develop EVs that will go on sale starting in 2025. And earlier this month, Honda and General Motors Co. expanded their existing tie-up with plans to jointly develop affordable EVs in major global markets.

Mibe says partnering with Sony, a company operating in a completely different industry, is a way for Honda to create new sources of value for its cars that the company couldn’t have conceived of on its own. A major draw of its partnership with GM is the cost savings afforded by the automakers’ combined production capacity. Together “we have globally significant volume,” Mibe said, “which will have a huge impact on costs.”

GM and Honda announced last week they’ll introduce their first model — with a starting price of less than $30,000 — in North America in 2027. Along with GM, Honda is seeking to bring EV costs down to an extent that they reach price parity with gasoline-powered cars, according to the Japanese automaker.

Honda is also looking to expand partnerships further in order to stay abreast of what Mibe sees as “constantly evolving” EV and battery technologies. In a sense, “we’re moving forward with our electrification strategy in a chaotic situation,” Mibe said. “We have to make sure our plans are flexible enough to respond to the daily progression of various technologies.”

At Tuesday’s briefing, Honda, which sources Ultium batteries from GM, said it’s exploring the possibility of creating a joint venture with another company for battery production and plans to source batteries for mini EVs in Japan from Envision AESC.

Honda itself will start trial production of solid-state batteries in early 2024 and is discussions with GM about next-generation batteries as well, according to Mibe.

A benefit, Mibe says, of Honda’s existing partnerships with Sony and GM is that there are no capital ties between the companies that restrict their actions. “We’re pursuing conversations as companies that are totally free,” he said. “The partnerships will strongly tie into the competitiveness of our global EV expansion.”