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2021
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Honda goes all in on EVs in contrast to rival Toyota

Honda has become the first of Japan’s automakers to state publicly it will phase out sales of gasoline-powered cars completely, setting 2040 as the goal and giving new CEO, Toshihiro Mibe, a once-in-a-career chance to put his stamp on a company that can trace its lineage back 84 years.

“It’s a very bold target,” said Yachiyo Tanaka, an analyst at automotive research company Fourin. “Honda has pledged to pull ahead of other automakers by introducing the latest technologies.”

The advantages, if Mibe can achieve the goal, are significant. Prime Minister Yoshihide Suga has pledged to achieve carbon neutrality by 2050 and companies with a first-mover advantage may capture market share.

EV penetration in the nation is 1 percent, well down on China, the world’s biggest market for electric cars, at around 6 percent.

But it’s a bet that stretches beyond Japan’s borders, too. Global sales of passenger EVs are set to rise sharply, jumping to 14 million in 2025 from 3.1 million in 2020, according to BloombergNEF.

Honda, which gets about 56 percent of its revenue from North America, has already begun aligning itself with powerful automakers overseas, last year striking a pact to use General Motors’s battery technology.

Honda’s electric strategy also include its traditional strength — motorcycles. Honda plans to unveil three new electric two-wheelers by 2024, as well as 10 new EV cars in China within five years.

The automaker’s first mass-produced EV, the Honda e, which was released last year, has a global sales target of 10,000 units annually.

Alliances

Honda “will not hesitate” to form alliances if necessary, Mibe, who took the reins on April 1, said at his inaugural press conference that month. He added he thinks the Japanese government’s target is reasonable.

“We can’t postpone making an effort and then expect to reach the target at the last minute,” said Mibe, 59, although he did note that selling only zero-emissions vehicles by 2040 will “be an uphill struggle.”

Honda declined to make Mibe available for an interview.

Critics of Honda’s strategy wonder whether the goal is realistic. Bigger players like Ford are not expecting to be 100 percent carbon neutral until 2050 while Toyota sees hybrids playing a much more important role.

Honda’s move is a short-term tactic to grab stakeholder attention as the focus around environmental, social and corporate governance picks up, said Takeshi Miyao, an analyst at Carnorama.

For Honda to position itself in the market it had to say something different from Toyota, he said. “Honda had no choice but to unveil a plan that is almost opposite to appeal to investors. It’s no use saying the same thing,” Miyao said.

Honda’s decision to end its long history with gasoline-powered engines is a marked shift.