Honda Motor has canceled its development of a large electric SUV targeted for a 2027 release, citing declining electric vehicle (EV) demand in the United States, according to a Nikkei Asia report. This decision reflects broader industry shifts as automakers recalibrate strategies in response to market and policy changes, redirecting focus toward hybrid vehicles to maintain profitability.

Shifting Market Dynamics

The U.S. EV market faces headwinds from reduced consumer demand and policy rollbacks. The recent passage of President Donald Trump’s “Big Beautiful Bill” eliminates the $7,500 federal tax credit for new EV purchases and leases, effective September 30, 2025. This policy shift exacerbates challenges for automakers like Honda, which anticipated stronger EV adoption.

Honda CEO Toshihiro Mibe noted in May 2024, “It’s really hard to read the market, but at the moment we see EVs accounting for about a fifth by [2030],” a significant downgrade from earlier projections of 30% EV sales by 2030.

Strategic Pivot to Hybrids

Honda’s response includes a 30% reduction in its electrification and software investment, dropping from 10 trillion yen ($69 billion) to 7 trillion yen ($48.4 billion). The company is now prioritizing hybrid electric vehicles, planning to launch 13 new hybrid models between 2027 and 2031, targeting 2.2 million units sold by 2030. Nikkei Asia reports that Honda is “redirecting efforts toward increasing production of profitable hybrid vehicles” to secure revenue while preparing for eventual EV growth. This mirrors industry trends, with Ford and Nissan also scaling back EV ambitions in favor of hybrids.

Continued EV Commitment

Despite the pivot, Honda remains committed to its long-term goal of 100% EV and fuel-cell vehicle sales by 2040. The company showcased its Honda 0 Saloon and Honda 0 SUV prototypes at CES 2025 in Las Vegas, signaling ongoing development of a flagship electric sedan and midsize SUV. These models aim to leverage advancements in battery efficiency and lightweight materials, though specific technical details remain undisclosed. Honda’s decision to pause a $10.7 billion EV production base in Canada and delay a hydrogen fuel cell plant in Japan further reflects a cautious approach amid market uncertainty.

Industry-Wide Realignment

Honda’s retreat from a large electric SUV aligns with broader industry recalibrations. Jaguar Land Rover abandoned EV production plans at a $1 billion factory in India, while Nissan canceled two electric sedan projects and reconsidered two electric crossover timelines. These shifts highlight the economic risks of heavy EV investments in a softening market. For EV enthusiasts, Honda’s focus on hybrids offers practical benefits, such as improved fuel economy (hybrids often achieve 40–50 miles per gallon) and lower upfront costs compared to EVs, which average $56,000 versus $48,000 for hybrids.

Blick in die Zukunft

Honda’s strategic pivot underscores the challenges of transitioning to EVs in a volatile market. While hybrids provide a bridge to electrification, the cancellation of the large SUV may limit options for consumers seeking spacious, zero-emission vehicles. As battery costs decline—projected to drop below $100 per kilowatt-hour by 2027—and charging infrastructure expands, EV adoption could rebound, potentially prompting Honda to revisit its plans. For now, the company balances short-term profitability with long-term sustainability goals, navigating a complex landscape for EV owners and enthusiasts.

Photos courtesy of Honda.