Foreword

For my second week of automobile industry research, I decided to take a closer look at Honda Motor Co., Ltd. Compared to the giants like Toyota and the comeback stories of Nissan, Honda has always been somewhat of a middle-ground player; engineering-driven, fiercely independent, and often doing things its own way. 

This week, I’ll be focusing on three key areas: Honda’s electrification strategy, its North American operations and its mobility innovation bets that might redefine what Honda is in the next decade.

The Honda DNA – Company Overview

Founded in 1948 by Soichiro Honda, the company started as a small motorcycle manufacturer before expanding into automobiles in the 1960s. Today, Honda is the world’s largest motorcycle producer and consistently ranks among the top 10 global automakers by sales volume.

What’s unique about Honda is its blend of scale and historical independence. Unlike Nissan, which relies heavily on alliances (Renault and Mitsubishi), Honda has traditionally operated without deep equity-based partnerships, focusing on in-house R&D and retaining tight control over its product pipelines. That said, in recent years, Honda has begun selectively collaborating with other firms to accelerate its transition into new domains like electrification and autonomous driving, marking a strategic shift rather than a full departure from its self-reliant philosophy. Its vehicle lineup spans compact cars like the Fit, to global best-sellers like the Civic and Accord, SUVs like the CR-V, and its premium offerings under the Acura brand.

Honda also has deep expertise in power equipment, robotics, and is a pioneer in alternative fuel technologies such as hydrogen fuel cells. However, this diversified portfolio is now facing serious tests as the auto industry enters a phase of accelerated transformation.

1. Electrification: Honda’s Late but Calculated Push

One of the biggest criticisms of Honda over the past five years has been its sluggishness in the battery electric vehicle (BEV) space. While it built a strong reputation with hybrids (especially with the i-MMD hybrid system in models like the Insight and CR-V), Honda has visibly lagged behind competitors in developing mass-market BEVs.

However, change is coming fast. In 2021, Honda announced its plan to phase out internal combustion engine (ICE) vehicles globally by 2040, with provisional goals to electrify 100% of its major-market sales by 2030. A key part of this strategy is its partnership with General Motors, through which Honda is co-developing electric vehicles using GM’s Ultium battery platform. The Honda Prologue SUV, produced in 2024 for North American markets, is one of the first fruits of this collaboration. This model proved to be greatly successful as it outperformed all of GM’s EVs.

Despite the success, Honda’s approach remains cautious. Rather than rushing into costly EV production lines on its own, the company is leveraging partnerships and shared platforms to reduce initial capex risks. In Japan, Honda is also working with Sony to develop a new EV brand, Afeela, targeting the premium market with tech-heavy offerings. These recent collaborations reflect Honda’s evolving strategy, one that supplements its in-house engineering with targeted partnerships in areas where speed and scale matter. There’s also a philosophical tension here. Honda's historical brand identity is rooted in fun-to-drive, mechanically excellent vehicles. EVs, which are increasingly software-defined, challenge that DNA. Whether Honda can infuse its driving dynamics into electric powertrains will be a defining question.

On the supply chain side, Honda is investing heavily in solid-state battery R&D, aiming for commercial production in the early 2030s. This tech could potentially leapfrog current lithium-ion limitations in range and charging times.

The takeaway? Honda’s electrification story is one of late entry but methodical scaling. Investors and analysts should watch not just for sales volumes, but for how Honda differentiates itself in an EV world increasingly dominated by software ecosystems.

2. North America: Tariffs, Reshoring, and Rebalancing

North America, particularly the U.S., has been Honda’s largest and most profitable market, accounting for nearly 50% of its global vehicle sales. Models like the CR-V, Accord, and Civic are perennial best-sellers. But the geopolitical environment is now forcing Honda to rethink its regional strategy.

In April 2025, the U.S. imposed a 25% tariff on Japanese automobile imports, part of President Trump’s “reciprocal tariffs” campaign. For Honda, which still exports a portion of its Japanese-manufactured vehicles to the U.S., this is a direct hit. However, Honda has long anticipated such risks. Over the past decade, it has localised significant production in North America, with major manufacturing hubs in Ohio, Alabama, and Indiana.The tariffs have accelerated plans for further reshoring. Honda recently announced a $700 million investment to retool several U.S. plants for EV production, aligning with both trade realities and consumer demand shifts.

But there’s more to the North American story. The U.S. market’s pivot towards larger SUVs and trucks challenges Honda’s historical strengths in compact and mid-size cars. To adapt, Honda is expanding its SUV lineup, investing in larger platforms, and even considering electrified pickups (an area where it traditionally had minimal presence).

The balancing act here is delicate. Honda must maintain its identity while adjusting to U.S. market dynamics. Its success will depend on how well it can execute this strategy without diluting its brand.

3. Beyond Cars: Mobility, Robotics, and Ambition

Honda’s ambitions go beyond selling cars and bikes. The company envisions itself as a mobility solutions provider, leveraging its strengths in robotics, AI, and alternative energy.

A key area of focus is autonomous driving. Through its collaboration with Cruise, a GM subsidiary, Honda is developing Level 4 autonomous vehicles for urban mobility services in Japan. In 2023, it launched pilot robotaxi services in Tokyo, aiming for commercial deployment by 2026.

Another futuristic bet is Honda’s work on eVTOL (electric vertical take-off and landing aircraft). These “flying cars” are targeted at urban air mobility markets, though commercialisation is likely a decade away. Yet, Honda’s R&D efforts here signal a willingness to think beyond traditional vehicle markets.

In robotics, Honda’s legacy project ASIMO has evolved into more practical applications, including assistive robots for elderly care and factory automation. While these segments are not yet major revenue contributors, they represent Honda’s long-term vision of integrating hardware, AI, and human-centric design. Although Honda has historically preferred self reliance, its openness to strategic partnership in these next-gen areas reflects a pragmatic shift where controlled collaboration is seen as a path to leapfrog capabilities rather than dilute control

However, the financial impact of these ventures remains uncertain. Unlike auto sales, these are capital-intensive bets with longer payback periods. For investors, the key will be tracking early commercialisation milestones and partnership formations in these frontier areas.

Financial Health & Strategic Risks

Honda’s financial position remains solid. As of FY2024, it reported ¥18.4 trillion in revenue and an operating margin of around 5.6%, slightly below Toyota but ahead of Nissan. The company’s net debt-to-equity ratio is conservative, and its R&D spending consistently exceeds 5% of revenue—a sign of commitment to future-proofing.

However, Honda faces familiar industry headwinds:

• Rising raw material and battery costs

• Capital expenditures for EV transition

• Geopolitical risks (tariffs, supply chain decoupling

• Intensifying competition from both legacy OEMs and EV startups like Tesla and BYD.
  

The next 3-5 years will be critical. Can Honda scale its EV business profitably? Will its U.S. pivot succeed? And will its long-term mobility ventures pay off or become costly distractions?

Final Thoughts

Honda is in a transitional phase. Its legacy strengths in engineering and hybrids provide a strong base, but the automobile industry’s tectonic shifts demand bold yet calculated moves. Electrification, trade strategy, and mobility innovations are not optional; they’re essential. If Honda can maintain its engineering edge while embracing the software and ecosystem playbook of the EV era, it could emerge as a quiet winner. But the clock is ticking, and the window to catch up with faster-moving competitors is narrowing. For now, Honda feels like the underdog with serious potential—cautious but capable. Whether it can translate that into market leadership is a story worth following.