In the public impression, Japanese automakers are generally slow to transition to electrification, but will anyone remember that Honda is the first mainstream foreign automaker to clearly propose a "ban on combustion" timetable. Now, in order to fulfill its promise, Honda doesn't mind spending a little more.
On May 16, Honda announced that it will invest 10 trillion yen (about 463.7 billion yuan) in electrification and software for the 2021-2030 fiscal year. This is double the amount of investment the company committed in April 2022. Japanese media Response commented: "The president of Honda's third department is making a big move to promote electrification. ”
(Honda President Toshihiro Mibe, image credit: NHK)
01
The amount of investment has been doubled
Back in April 2021, Toshihiro Mibe, who had just taken office as president of Honda, proposed an ambitious electrification development plan, announcing that he would completely stop selling new internal combustion engine vehicles by 2040, bringing the sales of pure electric vehicles and fuel cell vehicles to 100%. As a result, Honda became the first Japanese automaker to publicly state a ban on combustion.
Subsequently, under the leadership of Toshihiro Mibe, Honda continued to reduce expenditures in the field of traditional internal combustion engines, reduce the number of global models, and reduce production costs to improve the traditional business base. At the same time, Honda has stepped up its investment in electrification. In April 2022, Honda announced that it will invest JPY 5 trillion in electrification and software for FY2021~2030, of which JPY 3.5 trillion will be invested in R&D and JPY 1.5 trillion will be invested in production facilities.
Honda set a goal of launching 30 BEV models globally by 2030 and producing more than 2 million BEVs per year. To this end, Honda did not hesitate to join hands with Sony to build cars across borders and electrify in a multi-line layout.
However, although Honda's "stubbornness" in technology and strong strength in the engine field have been widely recognized by the industry, compared with Toyota, which promoted globalization early, and Nissan, which has a long-term cooperation with the French car company Renault, Honda seems to give the impression of being more "conservative" to the outside world, and the internal resistance to transformation is estimated to be not small. The most typical embodiment is that Honda has not been able to create explosive models in the field of electrification, and its electric vehicles have performed tepidly in China, Japan, and in the European and American markets. The electric car jointly built with Sony will not be launched until 2025, and the market has already "rolled" into a red ocean.
In response, Honda has chosen to increase its investment to 10 trillion yen from the 5 trillion yen announced two years ago. Toshihiro Mibe explains, "The figure of 5 trillion yen was said two years ago, but since then, various discussions have revealed that in order to realize software-defined vehicles based on pure electric vehicles, it is necessary to own the batteries that account for 3-4% of the cost in the first place. In addition, there is a need to strengthen software development, which was estimated two years ago and is simply not enough, so this part has increased significantly. ”
Specifically, of the 10 trillion yen invested, 2 trillion yen will be spent on automotive batteries, 2 trillion yen will be spent on automotive software development, and 6 trillion yen will be spent on product production innovation such as next-generation factories, two-wheeled vehicles, and new vehicle models.
It is claimed that Honda itself can afford to pay for the money. According to the estimates, Honda will generate operating cash flow of 12 trillion yen in fiscal 2021~2025 by strengthening its two-wheeled vehicle business, internal combustion engine and hybrid vehicle business. In FY2026~2030, Honda aims to increase its operating profit margin to 5% for electric vehicles and to exceed the previous five years.
At the same time, in order to reassure shareholders, Honda pledged not to reduce its dividend per share, even if short-term profits fluctuate due to the continued development of necessary forward-looking investments during the period of change. Honda plans to pay dividends of more than 1.3 trillion yen in fiscal years 2021-2025 and more than 1.6 trillion yen in fiscal years 2026-2030.
02
The cost of batteries has dropped by more than 20%.
As the competition in the electric vehicle market intensifies, how to reduce the cost of electric vehicles has become a top priority, and one of the landing points is the battery. Honda plans to secure a stable supply and competitiveness of batteries through external procurement + in-house production, and aims to reduce battery procurement costs in North America by more than 20% and production costs by 35% by 2030. Honda also said it will ensure that each region has access to the batteries it needs in the best possible way to meet its global production schedule of 2 million battery electric vehicles.
In the U.S., a battery plant jointly established by Honda and South Korea's LG Energy Solution will start production in 2025, with an annual battery production capacity of 40 GWh. In Canada, Honda will independently produce battery products jointly developed with GS Yuasa, and will establish joint venture plants in Canada with POSCO Future M and Asahi Kasei to produce cathode materials and separators for major battery components and materials.
In terms of models, Honda plans to launch seven Honda 0 Series global BEVs by 2030, covering large, medium and small models. The first model will be launched in the North American market in 2026 and is a production version of Honda's SALOON Concept, which was unveiled at CES in January this year.
For the Chinese market, Honda has emphasized that it will launch 10 BEV models by 2027 and achieve 100% BEV sales by 2035. To this end, in addition to the e:N series that has already been launched, Honda recently released a new electric brand "Ye" specially designed for the Chinese market, and three new models were unveiled. In addition, for markets that prefer small pure electric vehicles, such as Japan, Honda will also launch related products one after another.
Honda also intends to increase its annual sales of hybrid vehicles from the current 850,000 units to about 1.8 million units. To this end, Honda will apply its EV R&D technology to hybrid vehicles, upgrade its hybrid systems and platforms, and strengthen its conventional combustion engine vehicle business to "secure stable profits and invest the funds generated in new businesses such as EVs."
In terms of production, Honda said that in order to ensure profitability, it is necessary to make maximum use of existing production facilities, carry out mixed production of conventional combustion engine vehicles and pure electric vehicles, and actively introduce advanced technologies and equipment. For example, the new battery shell production line at the Anna plant in Ohio, USA, will introduce a 6,000-ton high-pressure die-casting machine and a giant casting machine.
In terms of software, in addition to increasing R&D investment, Honda announced on May 15 that it has signed a memorandum of understanding with IBM for R&D to establish a long-term partnership for next-generation semiconductor and software technologies. In addition, according to Japanese media reports on May 16, Toyota, Honda and Nissan are considering cooperating in the development of automotive software and standardizing it. The parties will discuss the specifics after the summer, with the goal of starting cooperation after fiscal 2025. The parties also hope to expand the cooperation to other Japanese automakers, including Suzuki, Mazda, Subaru and Mitsubishi.
(Image credit: Nippon TV)
It is worth noting that at the same time as Honda's headquarters announced a large-scale investment, in China, Guangqi Honda was revealed to have started to solicit voluntary resignations from May this year. Nikkei reported that as of May 15, more than 1,700 employees had agreed to leave, or about 14% of its total production workforce. In addition, Honda has set a sales target of 1.06 million units in China in 2024, a year-on-year decrease of 13% and a decrease of 4% compared to 2020, a record high. Perhaps, Honda will face a period of difficulty in China before the dawn of electrification, and it remains to be seen whether the huge investment of up to 10 trillion yen can push Honda to the forefront of the electrification track.
Text: Zhang Dongmei Editor: Huang Xia Layout: Wang Kun
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