Honda’s Focus On Electric Vehicles: In Line With Future Automotive Trend
Recently, as per a report by the Wall Street Journal, Honda Motors‘ (NYSE:HMC) CEO stated that he wants partially or fully electric cars to account for two-thirds of the company’s global sales by 2030. While electric vehicles (mostly gas-electric hybrids) currently account for 5% of Honda’s sales, the company hopes that hybrids and plug-ins will account for half of its sales in 2030 and other electric vehicles will take another 15%. As countries seek to address future energy requirements and reduce emissions of pollutants, electric vehicles are emerging as promising solutions for future transport. Toyota Motors believes that gasoline and diesel engines will become extinct by 2050 and hybrids will account for most of its global vehicle sales. As the automotive industry shifts towards eco-friendly vehicles and an increasing number of automakers such as Ford, General Motors and Toyota focus on electric vehicles, we believe Honda’s ambitious hybrid/EV targets are in line with the future trends in the automotive industry.
Demand For Electric Vehicles Highest In the U.S. And China
North America and China are the two biggest markets for Honda Motors and these regions are likely to drive sales of electric vehicles in future. A forecast released by the China Association of Automobile Manufacturers (CAAM) predicted that Chinese consumers will buy 250,000 electric and gas-electric plug-in hybrids in 2015 which is more than 200% higher than the 75,000 electric and partially electric vehicles purchased in 2014 from domestic car makers. This increase was primarily driven by government incentives and China is expected to become the world’s largest electric vehicle market by 2020. Honda Motors predicts that the company will not be able to sell any model without electric assistance in China by 2025, as emission regulations get tighter in the country. As an increasing number of countries tighten emission guidelines, electric vehicles are expected to dominate the car industry by 2030. A study by Google in 2013 suggests that electric, plug-in and hybrid vehicles could garner a collective market share of 90% by 2030. The study found that the rapid fall in battery costs and increase in energy density could allow the total cost of ownership of electric vehicles to drop below that of internal combustion vehicles by 2030.
As the automotive industry enters a transitional phase, with focus shifting out of gasoline and diesel cars, we believe Honda’s estimates for future production of hybrids and electric vehicles are in line with the industry trend. An increased focus on electric vehicles should enable Honda Motors to retain its market share in its two largest markets, North America and China, in the future.
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