Honda takes a gamble on electric
Santa Barbara, Calif. – Against a tide of low consumer demand for battery-powered vehicles and loosening federal emissions rules, Honda announced this week that it will aggressively pursue vehicle electrification. With a goal of two-thirds of brand sales coming from battery or hydrogen-fuel cell vehicles by 2030, the Japanese manufacturer is bullish on alternative fuels.
Though a pioneer in battery and hydrogen powertrains beginning with its (now defunct) Insight hybrid in 2000, Honda has had little impact on the electric vehicle market and only sold one battery-powered model in 2016, the Accord Hybrid sedan. The move to electrification marks a significant shift for a brand that has built its U.S. success on gauging consumer demand for efficient, gas-powered small cars and crossovers.
In 2016 the Civic, CR-V and Accord were the three top-selling vehicles in the retail market – after full-size pickups – with combined sales of more than one million units.
“This is a long-term vision to make sustainable, electrified vehicles – true volume vehicles for Honda,” says Jim Burrell, assistant vice president for American Honda Environmental Business Development.
To mark Honda’s new product ambitions, Burrell and his team invited national media here to test drive its flagship EV, the Clarity Fuel Cell – the first of three alternative powertrain Clarity vehicles to hit the market this year. The others, a plug-in electric vehicle and full-EV, will be introduced at the New York Auto Show next month. Honda will also announce an all-new hybrid vehicle in 2018.
With its stylish design, roomy interior and 366-mile range, the Clarity Fuel Cell (initially offered only in California) is just the second hydrogen production car in the U.S. market (along with Toyota’s smaller Marij). It ranks with General Motors’ late-1990s EV-1 electric car and Chevy’s 2017 Bolt EV as ambitious efforts to change the course of vehicle propulsion away from gasoline.
Honda press materials say this change is driven by “society’s need for dramatic CO2 reductions (that) are real and immediate.”
“Honda is the only mainstream brand that has set an electrification goal that is this aggressive,” IHS senior auto analyst Stephanie Brinley says of the company’s 2030 target. “This is a statement that will set the tone in this company that this is what matters.”
What matters to American voters, however, seems to be more SUV production and less government regulation. According to a 2016 Gallup poll, global warming ranks 12th out of 13 in problems seen by Americans. Meanwhile, hybrid/electric vehicle sales have dropped to less than 3 percent of vehicle sales. The newly elected Trump administration reflects those priorities and has promised to reduce carbon emission mandates on automakers.
“Washington may not be supportive of (electrification),” acknowledges Honda’s Burrell. But he notes that the Trump administration will likely leave in place the waiver that allows California – the biggest auto market in the U.S. – to set its own greenhouse gas rules.
Burrel added: “If you focus on California, it is ... driving a lot of this.”
IHS analyst Brinley agrees that government regulations are behind much of Honda’s product development. “They have to meet these emissions requirements not only in California but also in Japan, China and Europe,” she says. “And they are going to get stiffer.”
Honda long ago embraced the American market, backing up its sales with U.S. production. Honda now makes more cars in the U.S. (1.7 million) than in Japan (1.3 million). And it sells more of its U.S. production (from plants in Ohio, Indiana and Alabama) than any U.S. manufacturer except Ford.
With its electrification strategy, Burrell says that Honda is taking a risk given the apparent lack of consumer demand. But it’s not new territory for Honda.
“We don’t follow the same drummer as the rest of the industry,” he says. “In 1997 we introduced the compact CR-V crossover with unibody construction to what was then a non-existent segment. The car that started that segment was the CR-V.”
He says hydrogen and electric vehicles like the Clarity are also “something we genuinely believe in. Yes, the government requirements are a certain percentage of that, but we are at a point that (electrics) will take on a life of their own. Honda does things because it’s the right thing to do. This is best for the environment, and for Honda in the long term.”
Henry Payne is auto critic for The Detroit News. Find him at email@example.com or Twitter @HenryEPayne.