Honda has formed a “comprehensive strategic alliance” with CATL, one of the world’s top three EV battery producers. This is not just a contract for batteries, but a rather deep and broad partnership.
The two automakers that have been perhaps most disappointing in the electric vehicle era have been the companies best known for leading on hybrid technology, Toyota and Honda. It has been the case in several technology transitions that the companies that led in the previous era were near the back of the line or completely at the back of the line in the next one. Generally speaking, it’s hard to accept that your leadership position is fading and you need to reinvent yourself if you want to remain a leader. This new alliance between Honda and CATL could mean that Honda has realized that the 1990s are over and is finally waking up to the reality of 2020. Maybe. Or maybe not. Let’s dig in.
Regarding the breadth of the new partnership between Honda and CATL, the duo write: “This agreement will enable the two companies to begin discussions on a broad range of areas including joint development, stable supply, and the recycling and reuse of batteries.” That implies that Honda may want to be involved in battery chemistry or at least packaging innovation, mineral sourcing/mining, and the full lifecycle of a battery in order to maximize efficient use of resources, bring costs down, and push profit margins up.
There is no exclusivity involved (CATL can still sell batteries to other automakers), but “Honda has acquired CATL shares through CATL’s non-public issuance of stocks” as part of the alliance — approximately 1% of CATL’s shares. “Through the non-public issuance of stocks, CATL will strengthen its battery development and further expand production capacity, etc.”
The EV revolution is occurring far beyond China, and Europe is now actually the hottest region for growth — nearly 8% of new auto sales are EV sales, compared to a 4.3% EV market share in China. However, China was leading earlier, and its regulations made it clear to all automakers that they needed to speed up their electrification efforts. It seems this is one of the prime factors that lit a fire under Honda’s buttocks and got it to start looking for a battery leader to partner with. The first Honda model to use CATL batteries will hit the Chinese market in 2022, with no clear timetable for regions beyond that. “This alliance will be further expanded to the global level in the future.” What they mean by “global” is unclear. Europe? Honda does need to electrify there as well for clear regulatory reasons. North America? South America?
Honda’s only genuine foray into 100% electric vehicles up till now has seemingly been the Honda e, a cool and cute electric car aimed at the European market. The problem is that this small “city car” has a range of 220 km (137 mi) before needing to recharge, based on the WLTP rating system. That would have been great 5 years ago, but it’s extremely lame in 2020. It appears Honda desperately needs CATL’s help in order to get competitive in terms of pricing for the specs. (Note that Honda only needs to sell 10,000 electric vehicles a year to comply with European regulations, and that’s all it intends to sell of the Honda e.)
Adding insult to injury, Honda canceled production of the Clarity Electric at the end of 2019 because of low demand for the vehicle. (The Clarity Electric, like all electric Hondas to date, has been called a “compliance car” because it was only developed and sold for markets that required more EVs). The Clarity Electric’s range was a pitiful 143 km (89 miles).
Hachigo Head in Sand
Putting out a statement that is disturbing if it’s genuine, or is deep sarcasm if it’s not, Takahiro Hachigo, CEO of Honda Motor Company, said at the end of 2019: “I believe hybrid vehicles will play a critical role. The objective is not electrification, per se, but improving fuel efficiency. And we believe hybrid vehicles are the way to abide by different environmental regulations.” Going on:
“Are there really customers who truly want them? I’m not so sure because there are lots of issues regarding infrastructure and hardware. I do not believe there will be a dramatic increase in demand for battery vehicles and I believe this situation is true globally. There are different regulations in different countries, and we have to abide by them. So it’s a must to continue r&d. But I don’t believe it will become mainstream anytime soon.”
That didn’t inspire confidence. At least we now get a positive story about Honda and CATL joining forces. Additionally, it appears that Honda and GM have been moving forward with a potentially major collaboration as well, one centered around new “Ultium” batteries for electric cars.
Honda and GM’s Ultium Place
“[T]he Ultium battery features more aluminum and less cobalt than the batteries GM has used in its previous electric cars such as the Volt and Bolt.” Those batteries will soon be manufactured at a factory jointly owned in Ohio, USA. The Ultium batteries are supposed to initially be produced at a scale of 30 GWh per year, so mark this down as another “gigafactory,” just not a Tesla one.
“In a press release dated April 2, Honda and General Motors announced they will be working together to develop two all new electric vehicles for Honda. They will be built on GM’s global EV platform and powered by Ultium batteries. The exterior and interior of the new EVs will be designed by Honda and the platform will be engineered to support Honda’s driving character.”
That sure makes it look like Honda is so far behind that it needs to use the vehicle powertrains from a competing brand in order to produce any EVs worth buying.
I’ll wait till I see something solid with a Honda electric car that goes beyond forced European, Chinese, or Californian compliance before getting too excited and concluding Honda is waking up.
At the moment, the Honda Accord and Honda Civic are still top sellers in the United States, despite not having any pollution-killing partners. However, they will be doomed before long if Honda doesn’t find a way to create top-notch electric vehicles that can compete with the top EV models of 2020. They have already been passed up by the Tesla Model 3 in California.
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