Honda is killing its EVs – and any chance of competition in the future

I get it; It’s not an easy time for a dying automaker to sell electric cars, what with incentives burning and Chinese automakers knocking on the door. But Honda has taken it to another level.

This week, Honda killed off its paltry — and unpromising — EV plans. What little reason Honda had to compete in the EV arena is apparently gone, and with it, any chance of surviving the current mess of disruption plaguing the industry.

The company blames US tariffs and Chinese competition, two easy targets. But there was never a viable EV plan to begin with.

Honda kicked things off Thursday by halting development of the electric Acura RDX and the Honda 0 sedan and SUV, three models that were the company’s first EVs – but very little was shared with outsiders. Continuing on Friday, Automotive News reported that Honda will stop production of the Prologue, a car that was designed and built entirely by GM.

A decision can backfire in many different ways, but there are two that I would argue are the most important. By shelving EVs, Honda will be left far behind in two major shifts sweeping the auto industry: electric drivetrains and software-defined vehicles.

Missed out on EV opportunities

For Honda – and for many legacy automakers still starting to transition – an EV is just a car with a different drivetrain. I can imagine the Honda executives thinking they can wait out the awkward transition period and, when the engines and batteries are fully sorted, just change the fuel bits. How hard can it be?

That’s a mistake, of course. Many car manufacturers have found that throwing batteries into a car originally designed for an internal combustion engine is not very efficient. It may shorten the development cycle, but the resulting product ends up being heavier, less efficient, and more expensive to manufacture.

When developed as a real product, EVs give automakers the chance to rethink the car, and in the process, make it cheaper.

Take the example of Ford. The Mustang Mach E was a sales success, but not a financial one for Ford. The Mach E is based on a heavily modified version of the platform that also underpins the Escape, a fuel-efficient crossover. Part of the problem, Ford CEO Chris Farley said in a recent interview, is that legacy engineering decisions are holding the product back: The Mach E’s wiring harness is 70 pounds heavier than Tesla’s, for example. Small mistakes like those add up in a complex product like a car.

Honda will also miss out on several learning opportunities. There is learning by doing, both in development and production. There is also learning to develop new suppliers and supply chains. It will also miss out on valuable customer feedback – what do people really value in their EVs?

Sayonara, software-defined cars

Here, Honda is setting itself up for failure in the second disruption sweeping the auto industry: the software-defined vehicle (SDV), whose core capabilities can be developed and improved over time.

Consumers, especially those who buy EVs from the likes of Tesla, Rivian, and BYD, have become accustomed to the regular updates, smart infotainment software, and advanced driver assistance systems of Tesla, Rivians, Nio or Xiaomi. Honda has yet to make significant progress in any of those areas.

SDVs don’t have to be EVs, but they tend to be compatible. A larger battery in an EV makes it easier to power powerful computers, and allows things like over-the-air updates to happen when the vehicle is parked and “off.” Can Honda make a fossil fuel SDV? Sure, but it’s unlikely that it will for the same reason that it backfires on EVs: the old way of doing things is easier and more profitable, for now.

What does Honda stand for?

Honda is facing an identity crisis. At its core, it is an internal combustion engine company. It makes really good engines, and that is slowly starting to matter.

Other features of its vehicles are also being hit. For years, this company has prided itself on making cars for drivers. They are lightweight, functional, and handle well. But if a car drives itself, what does it mean to be a “driver’s car”?

Putting autonomy aside, I would argue that the driver’s car market is limited anyway. People are attracted to Honda because it is reliable and reasonably priced. The fact that they handle the cake well is probably to help consumers break the tie if they are torn between the two brands.

But EVs promise to be more reliable than gasoline vehicles, and as Chinese automakers are showing, if battery prices drop, so will overall vehicle costs. If Honda can’t compete on reliability or price, buyers will reject it.

That already seems to be happening in China. Honda said that in their recent earnings report. “Honda has not been able to deliver products that offer better value for money than those of new EV manufacturers, resulting in reduced competition,” the company said. The storms in China contributed to the company’s loss of about 16 billion last year. Aside from the EV program, it’s only a matter of time before Honda faces the same fate elsewhere.