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Honda’s lone act puts plan for self-driving, electrified vehicles at risk

Honda’s lone act puts plan for self-driving, electrified vehicles at risk

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Honda Motor Corporation’s go-it-alone strategy looks increasingly risky as an alliance-happy auto industry scales up to cope with the soaring investment needed for self-driving vehicles, electrified power trains, connected-car technologies and artificial intelligence.

In the latest industry tie-up, Toyota Motor Corp. and Mazda Motor Corp. on Friday announced plans to jointly invest in a $1.6 billion assembly plant in the U.S. with the capacity to produce 300,000 Toyota Corollas and a new Mazda crossover model starting 2021. Toyota will acquire about 5 percent in Mazda, which will hold a 0.25 percent in the bigger automaker. The duo will also combine engineering efforts on electric vehicle development and car-networking know-how.

Honda President and CEO, Takahiro Hachigo, like his predecessors, is not a fan of big alliances that involve equity stakes. In fact, Honda is the only major Japanese carmaker without a strategic industry partner, meaning it lacks the economy-of-scale benefits of lower research, production and parts costs enjoyed by Toyota, Volkswagen AG, and the Renault-Nissan-Mitsubishi Motors confederation.

“Honda is a question mark,” said Koji Endo, an auto analyst at SBI Securities in Tokyo. “Can they win with the current volume? Is it possible for Honda to do everything just by itself?”

Hachigo seems willing to try. Honda’s investing in self-driving cars and fuel cell technology, which powers cars with compressed hydrogen and emits water. By 2030, Honda aims to have two-thirds of global vehicle sales coming from electric drive-trains. Its Clarity sedan brand features an all-electric, plug-in hybrid and fuel cell versions.

Honda punches above its weight class when it comes to research and development spending, but that’s been a drag on profits. Its R&D budget represented about 4.9 percent of total sales last fiscal year, the highest among all major Japanese carmakers, according to data compiled by Bloomberg. Honda aims to increase R&D outlays by 54 billion yen this fiscal year, which is expected to contribute to a 14 percent decline in operating profit.

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