Honda, GM scrap $5B affordable EV plan amid auto industry setbacks

Honda and General Motors are scrapping a $5 billion plan to jointly develop affordable electric vehicles. On Oct. 25, about a year and a half after the endeavor was first announced, the two companies announced they were pulling the plug on their low-priced EV collaboration, which at the time had an aim of beating out Tesla sales numbers.

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“GM and Honda will share our best technology, design and manufacturing strategies to deliver affordable and desirable EVs on a global scale, including our key markets in North America, South America and China,” GM CEO Mary Barra said at the time. “We’ll sell more EVs in the U.S. than anyone else and to do that, you need to have a portfolio of vehicles. We definitely can scale and can do it quickly.”

Their goal had been to build millions of EVs that would cost less than $30,000 by the year 2027. Additional plans included working together on future battery technology to reduce the cost of electrification while improving the performance and drive sustainability of future models. With the decision to abandon their ventures now official, Barra has admitted that “as we get further into the transformation to EV, it’s a bit bumpy.”

“Last year, we began working on an affordable EV program for global markets, which was slated for introduction in 2027,” GM spokesperson Sanaz Marbley said. “After extensive studies and analysis, we have come to a mutual decision to discontinue the program. Each company remains committed to affordability in the EV market.”

The decision to shelve these efforts came amid a number of setbacks GM experienced earlier this month. The automaker said it is slowing the launch of several new EVs and postponing EV truck production at the Orion Assembly plant at a cost of about $1.5 billion. GM has also withdrawn its 2023 profit outlook, determining that revisions were necessary due to the $200 million per week cost of the ongoing United Auto Workers strike.

“We are not providing new targets, but are moving to a more agile approach to continually evaluate EV demand and adjust production schedules to maximize profitability,” GM CFO Paul Jacobson said. “The observation about slowing EV demand growth is something that everybody’s been talking about.”

Other manufacturers are delaying their EV plans. Ford, Tesla, Rivian, Nissan and Toyota have all postponed various aspects of their electric vehicle goals this year as a growing number of automakers have struggled to make their EV businesses profitable given the heavy investment it requires to produce them.

Honda CEO Toshihiro Mibe indicated as much when announcing the end of the company’s cheaper EV partnership with GM, telling Bloomberg that “after studying this for a year, we decided that this would be difficult as a business, so at the moment, we are ending development of an affordable EV.”

Honda also said, despite the end of this initiative, the company would continue alongside GM with other joint EV projects. Additionally, Honda has indicated that its plans to sell only electrified vehicles by 2040 remain in place.