Honda is killing its electric cars — and eliminating any chance of competition in the future

I get it; It’s not an easy time for a legacy automaker to sell electric cars, with incentives being eliminated and Chinese automakers knocking on the door. But Honda takes it to another level.

This week, Honda halted its frivolous — and frankly unpromising — electric vehicle programs. It’s clear that what little incentive Honda had to compete in the electric vehicle space is gone, and with it, any chance of surviving the current wave of turmoil sweeping the industry.

The company blames US tariffs and Chinese competition, which are easy targets. But it never had a viable EV strategy to begin with.

Honda kicked things off Thursday by halting development of the Acura RDX electric car and the Honda 0 sedan and SUV, three models that were the company’s first all-electric vehicles — but little about which has been shared with outsiders. It continued on Friday with auto news Preparing reports Honda will stop producing the Prologue, a car that was entirely designed and manufactured by General Motors.

A decision can backfire in many different ways, but there are two that I think are the most important. By discontinuing electric vehicles, Honda will fall further behind in two of the biggest transformations sweeping the auto industry: electric powertrains and software-defined vehicles.

Missed EV opportunities

For Honda — and many legacy automakers still in the early stages of transformation — an electric car is just a car with a different drivetrain. I can imagine Honda executives thinking they can wait out the difficult transition period and, when the engines and batteries are all sorted, simply replace the fossil fuel parts. How hard is it?

This is wrong, of course. Many automakers have found that dropping batteries into a car originally designed for an internal combustion engine doesn’t work well. This may shorten the development cycle, but the resulting product becomes heavy, inefficient, and more expensive to produce.

When developed as an original product, EVs offer automakers an opportunity to rethink the car and, in the process, make it cheaper.

Take Ford, for example. The Mustang Mach E was a sales success, but it was not a financial success for Ford. The Mach E is based on a heavily modified version of the platform that also underpins the Escape, a fossil-fuel-powered crossover. That’s part of the problem, said Ford CEO Chris Farley The last interviewis that outdated engineering decisions hampered the product: For example, the Mach E’s wiring harness is 70 pounds heavier than the Tesla’s. Small mistakes like this compound themselves in a complex product like a car.

Honda will also miss out on many learning opportunities. There is learning by doing, whether in development or manufacturing. There’s also learning how to grow new suppliers and supply chains. You’ll also miss out on important customer feedback – what do people really value in their electric cars?

Sayonara, software-defined vehicles

Here, Honda is setting itself up for failure in the second disruption sweeping the auto industry: Software-defined car (SDV), which has core capabilities that can be upgraded and improved over time.

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

SDVs don’t have to be electric vehicles, but they tend to go side by side. The large battery in an electric car makes it easier to feed powerful computers, and allows for things like over-the-air updates when the car is parked and parked. Can Honda manufacture a fossil fuel SDV? Sure, but it’s unlikely to happen for the same reason that EVs are falling behind: the old way of doing things is easier and more profitable right now.

What does Honda stand for?

Honda is facing an identity crisis. At its core, it is an internal combustion engine company. They make really good engines, and that’s starting to matter less and less.

Other features of its cars are also under attack. For many years, the company has prided itself on manufacturing cars for drivers. It’s lightweight, efficient, and handles well. But when the car drives itself, what does the phrase “driver’s car” even mean?

Autonomy aside, I would argue that the market for a driver’s car is limited anyway. People are attracted to Honda because they are reliable and affordable. The fact that they handle it so well is the icing on the cake, and may help consumers break even if they’re torn between two brands.

But electric cars promise to be far more reliable than fossil fuel vehicles, and as Chinese automakers show, once battery prices fall, so do overall vehicle costs. If Honda can’t compete on reliability or price, consumers will reject it.

This appears to be already happening in China. Honda said as much about that Latest earnings report. “Honda has not been able to offer products that offer better value for money than those offered by newer electric vehicle manufacturers, which has led to a decline in competitiveness,” the company said. Headwinds in China contributed to the company’s losses, which amounted to about $16 billion last year. Without a plan for electric vehicles, it’s only a matter of time before Honda suffers the same fate elsewhere.