Honda has cancelled three electric vehicles it was developing for the US market, blaming President Donald Trump's tariffs and rising competition from Chinese EV companies. The Japanese automaker said the change of plans will cost it up to $15.7 billion.
The three vehicles cancelled for US production are the Honda 0 SUV, Honda 0 Saloon, and Acura RSX. These models were scheduled for production at the Honda EV Hub in Ohio later this year. Honda had invested over $4.4 billion to establish the Ohio EV Hub, one of the state's largest economic projects, to create a North American supply chain for electric vehicle production.
Honda determined that starting production and sales of these three models in a business environment where demand for EVs is declining significantly would likely result in further losses over the long term. Honda highlighted the US government's policy shift as a major factor, including "the abolition of tax incentives for EV purchases, the easing of emissions regulations, as well as the imposition of import tariffs."
The tariff burden has been substantial. Honda estimated a 385 billion yen ($2.6 billion) hit from US tariffs, although that was less than the 450 billion yen originally flagged. But beyond the immediate trade costs, the removal of federal EV purchase incentives undermined Honda's entire business strategy for electric vehicles in America.
China's competitive advances present an even graver challenge. Honda was unable to deliver products that offer value for money better than that of newer EV manufacturers, resulting in a decline in competitiveness. Competition from Chinese EV makers such as BYD is becoming increasingly difficult across Southeast Asia, with the growth of Chinese EVs in Thailand over the past two years described as extraordinary.
To turn things around and improve profitability, Honda will dedicate more resources to next-generation hybrids. Executive Vice President Noriya Kaihara said Honda is developing a next-generation hybrid powertrain and automated driving system for commercialisation after 2027. Japanese automakers are turning to India, a market that remains all but closed to Chinese EV makers, with Honda announcing it will make the world's third-largest auto market a production and export base for one of its planned electric vehicles.
Due to the economic situation, several top executives are returning or reducing their salary by up to 30 per cent of their monthly compensation for three months. The automaker is planning to announce a revised mid to long term strategy at a press conference scheduled for May of this year.
Honda joins a string of other carmakers that announced plans to either delay or cancel a new EV in the US following the Trump Administration's policy changes, with Hyundai, Kia, Volkswagen, Ford, and other major automakers scrapping major EV projects.