Honda and General Motors Abandon $5 bn Project for Affordable Electric Vehicle

GM CEO Mary Barra

Honda Motor and General Motors (GM) have announced their decision to terminate a collaborative effort to develop affordable electric vehicles (EVs). This announcement comes just a year after both automotive giants joined forces in a $5 billion initiative aimed at challenging Tesla’s dominance in the electric vehicle market, Reuters news report said.

The move underlines General Motors’ strategic shift towards slowing down the launch of several electric vehicle models to prioritize profitability. The company faces mounting costs due to ongoing United Auto Workers strikes, with expenses reaching a staggering $200 million per week in the current month.

General Motors had also withdrawn its profit outlook for 2023 on Tuesday, a decision that reflects its commitment to financial prudence amid the challenging labor disputes.

In a joint statement, both companies expressed their mutual decision to discontinue the collaborative program, while emphasizing their continued commitment to affordability within the electric vehicle market.

However, Honda has reiterated its unwavering commitment to selling exclusively electrified vehicles by 2040. The company’s stance on the electrification of its vehicle lineup remains unaffected by this development.

GM’s CEO, Mary Barra, clarified during an earnings conference call that the automaker is shifting its focus away from entry-level electric vehicles. This decision includes redirecting the previously committed $5 billion investment towards GM’s Bolt EV, effectively ending the partnership with Honda in this segment.

The collaboration between Honda and General Motors, established in April of the previous year, had set out to develop a range of lower-priced electric vehicles based on a new shared platform. The ambitious initiative was projected to manufacture millions of vehicles starting in 2027, with a focus on “affordable” electric vehicles, including compact crossover models utilizing GM’s Ultium battery technology.

According to Toshihiro Mibe, CEO of Honda, “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.”

Despite this setback, Honda clarified that its separate partnership with General Motors and the Cruise unit will remain unaffected. This assurance follows a recent safety incident in California that resulted in the suspension of Cruise’s driverless testing permit in the state. On Tuesday, California ordered Cruise to remove its driverless cars from state roads, citing safety concerns and alleged misrepresentation of the technology’s safety.

Last week, Honda announced its intention to establish a joint venture with General Motors and Cruise in the first half of 2024, with plans to launch a driverless ride service in Japan in early 2026.