With GM's help, Honda set to go gasoline-free by 2040

TOKYO—Honda's new CEO wants the company's U.S. lineup to be gasoline-free by 2040 as part of an ambitious new electrification plan that will lean on General Motors and solid-state batteries.

Toshihiro Mibe, who took office April 1, pitched the vision last week as a mission to derive all of Honda Motor Co.'s global auto sales solely from electric and fuel cell vehicles by 2040, just 19 years from now. The timeline makes Honda—a company that currently assembles only one EV model—the first Japanese auto maker to declare its aspiration to completely ditch the internal combustion engine.

Honda wants to achieve the goal in steps, first getting 40 percent of its sales in major markets from full- electric and hydrogen fuel cell vehicles in 2030, then 80 percent in 2035 and all of them by 2040.

"The hurdles are quite high," acknowledged Mibe, who formerly was head of Honda's R&D division. "But I think we can get them. The fact that we have set targets clearly is the first step toward that goal."

Partnering up

The transformation won't be cheap. Honda said it expects to invest more than $46 billion in R&D over the next six years to make it possible.

But Honda's decision comes as competitors worldwide rush to roll out EVs to meet increasingly stringent emissions regulations. Boston Consulting Group forecast in a study released this month that zero-emission technologies will replace internal combustion engines "as the dominant powertrain" for new light-vehicle sales globally just after 2035.

The consultancy said about 92 percent of light vehicles sold in the U.S. in 2020 were powered solely by gasoline or diesel engines. But it projects that number will fall to just 2 percent in 2035.

Honda, a company that helped pioneer gasoline-electric hybrid technology, currently makes just one EV nameplate, the low-volume subcompact E hatchback, and it is available only in Japan and Europe. On the eve of last week's Shanghai auto show, Honda showed its SUV e:Prototype, a full-electric crossover that will go on sale in China next year.

In a previous strategy, Honda had wanted to derive two-thirds of its global volume from standard hybrids, plug-ins, battery-electrics and fuel cell vehicles by 2030. But that target leaned heavily on traditional gasoline-electric hybrids. The new vision aims to have 40 percent of its sales in major markets be full-electric and fuel cell vehicles by that year.

North America figures prominently in Honda's electrification plan, even though today the Honda brand sells only a handful of hybrid vehicles there, including the CR-V, Accord and Insight.

Honda now targets that its North American EV and fuel cell-vehicle sales will mirror its global goals and reach 40 percent in 2030, 80 percent in 2035 and 100 percent by 2040.

A partnership with GM will be one way Honda gets started. The arrangement will supply Honda with two large EVs beginning with the 2024 model year, one for the Honda brand and one for Acura, Mibe said.

Honda is partnering with GM partly for the U.S. company's batteries. EV power packs are heavy and costly, and difficult to transport, making it critical to have local production. For that reason, Mibe said Honda will initially use GM's Ultium batteries for electric cars, which are manufactured in North America.

Battery breakthrough

But looking further into the future, today's lithium ion batteries won't cut it. Mibe said a breakthrough in battery performance, cost, safety and reliability is needed to realize the full scale of Honda's EV ambitions.

"The battery will be the key," Mibe said.

To that end, Honda is banking on a new technology of solid-state batteries. The company plans to deploy solid-state batteries in new models from the second half of the 2020s. It will start verifying production of the new batteries on a demonstration line this fiscal year.

Also in the second half of this decade, Honda will roll out a new dedicated EV platform called e:Architecture. It will first be deployed in North America, then globally.

Mibe also said Honda may need to overhaul its manufacturing strategy in the new era and set up new assembly lines dedicated solely to the production of electric vehicles.

Mibe outlined similar timelines for China and Japan but didn't detail plans for Europe.

Honda's new boss said the EV shift is a step toward achieving companywide carbon neutrality by 2050. Last week, he also set lofty 2050 targets for achieving carbon neutrality in all products and corporate activities and of realizing zero traffic fatalities in its motorcycles and automobiles.

He also wants to develop products from 100 percent sustainable materials.

Mibe declined to offer an overall long-range volume target, saying that the goal is not sales numbers but good products and profitability. He said Honda wants to achieve sustainable operating profit margin of 7 percent, even with the shift to electrification.