THE Honda Motor Co has announced that it is cancelling three new model EV programs destined for North America as it declares sunk expenses and losses totalling 2.5 trillion yen ($A22.4 billion) over two years.

The inability to recover its investments in EV design and development has led to the company’s first loss since it went public in 1957.

Honda said that it is now reassessing its entire EV commitment in the face of a worldwide decline in its EV sales and lost sales in Asia.  

Acura RSX Concept

The company said it is expecting to make a loss of between 360 billion yen ($A3.22 billion) and 630 billion yen ($A5.64 billion) for the full year to March. It had previously forecast that it would make a profit of 360 billion yen in the latest year making a turnaround of up to 990 billion yen ($A9 billion) on expectations in less than 12 months. 

Asia Nikkei reported that the company called an emergency news conference at which Honda said in a statement that the “profitability of Honda’s Automobile business is declining”. 

Honda placed blame on the change in its fortunes primarily due to “changes in the internal combustion engine and hybrid electric vehicle categories” brought on by changes in the policies of the US government, this included tariffs imposed by President Donald Trump.

Honda President and CEO Toshihiro Mibe

The company also said that its focus of developing EVs had taken its eye off the ball in Asia stating that there was a decline in the competitiveness of Honda products in Asia, because more resources were poured into developing EVs.

Honda President and CEO Toshihiro Mibe told the press conference, “We recognize that the entire automotive industry is undergoing a major transition.

“Looking back, it was an issue requiring reflection that we were unable to sufficiently revise our strategy with flexibility and multiple scenarios in response to changes in market conditions and policy trends.”

Asia Nikkei reported that Honda warned the auto business environment was “changing dramatically day by day, and the outlook remains uncertain”.

SUV concept

The company said it was suffering from “intensified competition due to the rapid emergence of newer EV manufacturers,” and would incur impairment charges and losses from write-offs on EV models it had planned to make in North America, in addition to impairment losses due to stiffer competition in China.

Honda said it planned to strengthen its hybrid offerings and streamline its EV model line-up “in light of the recent slowdown”.

“Honda will promote electrification flexibly from a long-term perspective, while balancing profitability and demand trends.”Asia Nikkei said the three models being canceled are the Honda 0 Saloon, Honda 0 SUV and Acura RSX. Mr Mibe said the three models were “hardly viable” under current market conditions.

“I’m fully aware of the passion poured in by many employees, business partners and sales staff, as well as the high expectations expressed by our customers,” he said.

The company said that included in the expenses and losses are the disposal of development assets and compensation for suppliers involved in the development of the discontinued models.

Honda had planned to eliminate sales of internal combustion engine vehicles and only sell EVs and fuel cell vehicles by 2040. However Mr Mibe told the press conference Honda will now focus on hybrid vehicles.

By John Mellor