Honda (HMC.US) firmly pursues the "ditch electric for hybrid" strategy, plans to invest $2.5 billion to build a new hybrid car factory in the US

According to Jinse Finance, Honda Motor (HMC.US) plans to build a new hybrid vehicle production plant in Ohio, USA. The project is currently in the final stages of preparation. It is reported that Honda plans to invest about 300 billion to 400 billion yen (approximately $1.9 billion to $2.53 billion) in this new plant, which is expected to begin production in 2030.

The North American market is the “anchor” of Honda's automotive business. Financial results released last month show that the U.S. market contributed about half of Honda's global vehicle sales in the first fiscal quarter. The weakening yen has further amplified the book value of overseas profits. In terms of tariff costs, Honda stated that the impact of tariffs in the quarter has already been absorbed.

Dragged down by over $9 billion in restructuring costs from its failed electric vehicle strategy and the immense competitive pressure from Chinese rivals, Honda reported its first annual loss in seventy years this May. At the annual shareholders meeting in June, CEO Toshihiro Mibe stated that as EV subsidies are withdrawn, Honda decided to make large-scale write-downs related to EVs, mainly because the market share for battery-powered EVs in the U.S. was much lower than the company expected. This means that selling the planned EV models will require significant incentives.

Toshihiro Mibe stated that if the company proceeds with its planned EV sales, “this will mean that the overall car business itself will remain in operating loss for at least five years, and possibly as long as seven years,” adding that this would put Honda in an extremely dangerous long-term adverse situation. Meanwhile, the company is shifting its strategy towards hybrids—where it holds a strong industry advantage—and a more realistic cash flow outlook from traditional gasoline-powered vehicles, as well as starting to pursue intelligence and software cooperation.

Honda plans to launch 15 new hybrid models by March 2030, mainly targeting the North American market. The company plans to stop selling its only pure electric model, the Prologue SUV, in the U.S. this year and indefinitely shelve plans for establishing an EV battery supply chain in Canada. This marks Honda’s shift from an aggressive electrification strategy to a pragmatic hybrid-centered approach.

In the field of software-defined vehicles, Honda and Nissan are advancing joint development of central electronic control units (ECUs), aiming to use shared components in vehicles around 2029. Honda CEO Toshihiro Mibe has publicly confirmed that both sides are discussing this collaboration.