Honda eyes new alliances to make electrification profitable

The Japanese automaker expects to see profitability of its car business improve in the next fiscal year

Honda Motors will take electrification as an opportunity to review its product lineup and improve profitability, according to new chief executive Toshihiro Mibe

Honda Motor’s new chief executive said on Friday the Japanese automaker was willing to form new alliances to make electrification profitable.

“If through an alliance Honda can accomplish early what it should aim to be, then we'd be willing to form an alliance,” Toshihiro Mibe, who took the top job in April, told a press briefing, when asked how he envisions global alliances on electrification.

Mr Mibe's comments reflect the pressure on the global auto industry to share technology and costs to meet demands for cleaner vehicles. He has assumed the top role at Japan's second-largest automaker at a time of a growing shift in automobile technology to electric vehicles (EVs) and autonomous driving.

Honda and its alliance partner General Motors have said they would introduce two jointly developed large-sized EV models in North America, using GM's Ultium batteries, in 2024 and will launch a series of new models which feature a new EV platform dubbed “e:Architecture".

The two companies already collaborate on autonomous vehicles, as well as on fuel-cell vehicle (FCV) technology, and are exploring more ways to expand their alliance.

Honda has said it aims to increase the ratio of EVs and FCVs to 100 per cent of all sales by 2040.

The price of electric vehicles, like home appliances, drops rapidly once the products are out in the market, Mr Mibe said.

“Building an alliance will become a huge direction in terms of increasing the number of electric vehicles, considering how electrification is not commercially feasible right now,” he added.

Traditionally known for its fuel-efficient internal-combustion engines, Honda launched its first mass-produced all-battery vehicle last August.

Honda could differentiate itself in the electrification race with next generation batteries for EVs, Mr Mibe said.

The Honda chief also said that the automaker expects to see profitability of its car business improve in the next fiscal year as a result of shutting down several unviable manufacturing facilities, including its factories in the UK, Turkey and Japan.

Last year, Honda saw operating income margin at 13 per cent for motorcycles and 1 per cent for cars.

The company will take electrification as an opportunity to review its product lineup and to improve profitability, Mr Mibe said, adding that Honda is considering a new digital service or business by utilising customer data.