London, 14 May (Argus) — Japanese automaker Honda has abandoned its long-standing target to transition entirely to battery electric (BEV) and fuel-cell vehicles by 2040 because of “consumer trends”, marking a major retreat from one of the industry’s most ambitious electrification strategies.
The firm is scrapping its goal for EVs to account for 20pc of sales by 2030 and its commitment to exclusively sell BEVs and fuel-cell vehicles by 2040, as weaker-than-expected EV demand and mounting losses have prompted the company to pivot back towards hybrid vehicles, chief executive Toshihiro Mibe said.
Changing consumer trends were a key factor in the decision, as well as severe political upheaval since the beginning of the decade, Honda’s head of government affairs, Patrick Keating, said at the FT Future of the Car Summit on 14 May.
“Given the slower uptake, changing consumer demands and the focus on hybrids, the announcement this morning is moving away from a technology target to a target that’s more about total, lifetime CO2 emission reductions and leaning towards where the consumer is going, which is hybrid,” he said. Some regions are reconsidering emissions targets in light of global upheaval, he added.
“The EU CO2 targets and UK ZEV [zero-emission vehicle] mandate which we talked about for 2035 were set very much in a different time. Once those targets were set, we then had Ukraine, a new radically different administration in the US, which has global impact.”
Honda’s reversal comes as it reported its first annual loss since listing in 1957. The company posted a net loss of ¥423.9bn ($2.7bn) for the financial year ended March 2026, which was largely driven by more than $9bn in EV-related write-downs and restructuring costs tied to cancelled or delayed electrification projects. Vehicle sales also weakened, with Honda’s global automobile deliveries falling to 3.4mn units from 3.7mn units a year earlier, reflecting slowing EV demand and intensifying competition, particularly in China.
Honda is now shifting its near-term strategy towards hybrid vehicles, aiming to capitalise on stronger hybrid demand in North America and other key markets. The company signalled this direction in late 2024, when it announced plans to double hybrid sales by 2030 as a “bridge” to full electrification.
The company also confirmed it will indefinitely suspend plans to build a comprehensive EV value chain in Canada, a project originally announced in April 2024 and valued at around C$15bn ($11bn). The plan included EV assembly, battery production and battery material processing facilities intended to strengthen Honda’s North American EV supply chain. Honda had initially delayed the project by two years in May 2025 because of slower EV demand, but has now moved to suspend the investment indefinitely.
By Thomas Kavanagh
