In April 2022, we reported that Honda and GM had announced a new partnership that would jointly develop affordable electric vehicles — emphasis on affordable. There were plenty of electric vehicles available, priced at $50,000 and up, but precious few EVs that people on a budget can afford. Honda and GM intended to fix that. At that time, Chevrolet said its new Equinox EV will have a starting price around $30,000.
The partnership was to focus on the General Motors Ultium platform and leverage both automakers’ robust manufacturing capabilities. Some would also utilize Honda’s e-Architecture platform used in the Honda e. The first vehicles from the partnership were expected in showrooms in time for the 2027 model year.
That was then; this is now. On October 25, 2023, Bloomberg (paywall) broke the news that Honda is shelving its plans to jointly develop affordable electric vehicles with General Motors due to a changing business environment. The news came via a statement by Honda CEO Toshihiro Mibe.
GM warned earlier this week that it can no longer say whether it will achieve its forecast for $14 billion in profit this year, blaming the United Auto Workers strike because it’s made the company’s financial future too difficult to predict. Costs are mounting on the order of $200 million a week due to the work stoppage, which has already cost the company $800 million in lost profits.
“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,” Mibe said in an interview with Bloomberg Television. “GM and Honda will search for a solution separately. This project itself has been canceled.” Mibe didn’t specifically mention the UAW strike, but cited cost and range challenges as reasons for halting the plan.
GM confirmed the development. “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 in an email to The Verge. “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 goal of the partnership was to produce EVs that will be priced below GM’s planned $30,000 Chevrolet Equinox and similar future offerings from Honda. By joining forces, GM and Honda were betting on reducing battery costs faster and developing EVs at prices comparable to rival market leaders Tesla and BYD. GM and Honda had been deepening ties to share development costs and increase sales. The companies have been working together on hydrogen fuel cells since 2013 and are collaborating on EV batteries, gasoline-powered vehicles, and self-driving technology.
What About The Honda Prologue?
So far, there has been no indication the partnership between Honda and GM to build electric SUVs at GM’s Spring Hill, Tennessee, factory will be affected by this news. The Honda Prologue is well along on the path toward production, and an Acura version is planned as well. The Prologue is scheduled to be in showrooms by the spring of next year at prices starting under $50,000. In addition, Honda is planning to import GM’s Cruise Origin autonomous vehicles to Japan in 2026.
But The Verge says the decision to scrap plans for more affordable EVs is certain to deepen worries about the future of the EV market in the US and abroad. Tesla’s price cuts, shrinking profit margins, and softening demand have kicked up a hornet’s nest of anxiety about the massive shift to electric vehicles that’s currently underway. The UAW strike has added to those anxieties.
That anxiety is being reflected in recent actions taken by several US automakers. GM announced recently it is moving back the introduction of electric pickup trucks from Chevrolet and GMC while Ford has cut one of its three shifts at the factory that builds the electric F-150 Lightning.
“We are adjusting the schedule at the Rouge Electric Vehicle Center because of multiple constraints, including the supply chain and working through processing and delivering vehicles held for quality checks after restarting production in August,” Ford said in a statement. It said 700 jobs would be affected, but that the cuts were not in response to the current UAW strike against the company.
General Motors said recently it will delay the conversion of its Orion Assembly plant in Michigan, which was supposed to be repurposed for the production of the Chevrolet Silverado EV and GMC Sierra EV pickups, and will push production to late 2025 in order to “better manage capital investment while aligning with evolving EV demand.”
“Evolving EV demand” is the key phrase here. “Brands like Chevrolet, Ford, and GMC made assumptions about what percentage of their future truck sales would be electric trucks. It’s clear those assumptions were unrealistic based on the current and near-term future demand for these models,” iSeeCars analyst and longtime industry watcher Karl Brauer told Yahoo Finance. Many analysts are wondering whether the auto industry bit off more than it could chew, especially with all the uncertainty surrounding the United Auto Workers strike.
LG Energy Solution Warning
Lee Chang-sil, the chief financial officer for LG Energy Solution, said during an earnings call this week, “EV demand next year could be lower than expectations.” He warned that revenue growth could slow in 2024 because of sputtering growth in major economies such as China and Europe, as well as high interest rates making loans too expensive for would-be buyers, according to Fox Business.
Few news reports focus on the interest rate issue. Globally, interest rates have been historically low since the economic turmoil that ricocheted around the world in 2007 and 2008. Compared to those near-zero rates, interest rates are OMG! expensive. For those who grew up before the financial meltdown, however, they are normal or slightly higher. Still, the higher cost of money is affecting businesses and consumers who are used to being able to borrow at historically low rates.
How much high interest rates and upheavals in Ukraine and Gaza are affecting large corporations like Honda and General Motors is hard to assess. We do know that Elon Musk said at the most recent earnings call that Tesla is slowing its plans for a new factory in Mexico due in part to high interest rates.
We probably will never know all the details behind this change of heart by Honda, but we can say with reasonable confidence that its announcement this week is not good news for those hoping more affordable EVs will be in showrooms and on the road in America soon.
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