Global EV Slowdown Prompts Honda to Put Brakes on Investment Strategy; Maintain Its Investment in Software Development

By Daisuke Narahashi / Yomiuri Shimbun Staff Writer

20:00 JST, May 21, 2025

Honda Motor Co.’s recent decision to put the brakes on its investment in electric vehicles and assess market trends was made in response to the global slowdown in the EV market.

The automaker plans to position its already successful hybrid vehicles as the primary growth engine for the next few years. However, the company’s overall business environment has become more challenging due to U.S. tariff measures and Chinese rivals expanding their presence in Southeast Asia.

Honda President Toshihiro Mibe discussed the current EV market at a press conference on Tuesday, saying, “Uncertainty is increasing.”

In May last year, Honda announced plans to invest a total of ¥10 trillion in EV and software development by fiscal 2030. However, the company now plans to reduce such investment to ¥7 trillion. This decision was partly influenced by U.S. President Donald Trump’s stated reluctance to promote EVs.

The accelerating slowdown of the EV market is also a burden on Honda, which had previously aimed to sell more than 2 million EVs in 2030. The company presented a revised plan on Tuesday indicating sales of 700,000 to 750,000 units instead, about one-third the original target.

Mibe stated that his belief in EVs as the industry’s optimal long-term decarbonization solution remains unchanged, emphasizing that this reduction is merely a temporary postponement of investment.

With other major automakers, such as Toyota Motor Corp., reevaluating their EV businesses, Honda was effectively compelled to shift its EV strategy as well.

Driving forward

Despite the overall reduction in EV investment, Honda will maintain its level of investment in software development.

Honda has fallen behind U.S. and Chinese EV automakers, such as Tesla Inc. and BYD Co., in developing next-generation software-defined vehicles (SDVs), whose functions can be enhanced through software updates.

As part of its efforts to regain ground, Honda plans to invest ¥2 trillion in SDVs by fiscal 2030.

Through this initiative, the automaker intends for SDV functionality to be installed on 13 of its hybrid models for release as early as 2027, with the overall goal of achieving widespread adoption of the system in its vehicles.

However, the development of SDVs requires huge investment, which would be difficult for Honda to shoulder alone. Although Honda is exploring collaboration in the SDV field with Nissan Motor Co., the breakdown in the merger talks between the two companies limits the potential synergistic effects.

Honda continues to face challenges in China, where local manufacturers are launching low-cost electric vehicles. Sales in China dropped 30% year-on-year in 2024.

Additionally, projected U.S. tariffs are expected to reduce its operating profit, a key measure of core earnings, by up to ¥650 billion in the current fiscal year.

Amid these challenges, Honda is seeking a breakthrough in India, the world’s most-populous country.

Although Chinese automakers are intensifying their “southward expansion” into Southeast Asia, they have made limited inroads into India.

Honda plans to leverage the strong brand recognition and sales network it has cultivated through its motorcycle business to increase its presence in the Indian market.

“We will grow in India, where we have yet to focus our efforts [in the four-wheel vehicle market],” Mibe said.