At CES 2025, Honda and Sony introduced their first electric vehicle, the Afeela 1, initially available for pre-order in California, with plans to expand across the US and Japan. This launch is a crucial step in their partnership, which started in 2022. Despite the buzz, the market remains uncertain about the vehicle's long-term success.
Honda is also considering strategic alternatives in response to potential challenges posed by Donald Trump's return to the presidency. This has necessitated the formulation of a Plan B for electric vehicle production in North America, reflecting a prudent approach amidst the current political and economic uncertainties. The situation leaves the industry speculating about Honda's next strategic moves, with implications for market dynamics.
A noteworthy aspect of the Afeela 1 is its deviation from traditional car sales practices. Sony Honda Mobility has eschewed the conventional dealership model in favor of an approach reminiscent of electric vehicle trailblazers like Tesla and Rivian, emphasizing online direct sales and retail presence. The Afeela 1 will be assembled at Honda's Ohio plant, utilizing Qualcomm's advanced chip technology.
However, this shift in sales strategy has raised concerns among Honda dealers, drawing parallels to the backlash faced by Volkswagen AG when Scout Motors, its subsidiary, adopted an online direct sales model. This move sparked criticism from dealers in California, who argued it contravened state franchise laws.
Further complications arose from Stellantis' experience, which endured intense criticism from US dealers concerning inventory management, pricing strategies, and evolving collaborative structures. These issues were believed to have contributed to the resignation of former CEO Carlos Tavares.
As Honda revels in the spotlight with the Afeela 1, it concurrently braces for the possibilities of a Trump administration, which could significantly impact the automotive sector. Trump's potential policies, including tariff impositions on vehicles imported from Mexico and Canada, have led Honda to reconsider its production strategies. The automotive industry at large is wary of policy shifts, affecting participation at events like CES 2025.
Noriya Kaihara, Honda's executive vice president, has acknowledged that Trump's return to power could force Honda to adopt a cautious stance in its production blueprint. Moreover, Honda's investment in a Canadian battery facility, initially aimed at fortifying its supply chain vertical integration, including lithium battery production, is now subject to reevaluation, possibly stalling a CAD15 billion (approx. US$10.43 billion) investment plan.
Adding another layer to Honda's strategic maneuvering is the prospect of a merger with Nissan Motor, driven by excess capacity in North America. Although COO Shinji Aoyama confirmed the discussion of the merger two months ago, he refrained from providing specific details, particularly regarding potential workforce reductions. This proposed merger underscores Honda's efforts to recalibrate its approach amidst the evolving automotive landscape.