Honda is killing EVs and may compete in the future.

I understand it; With incentives disappearing and Chinese automakers knocking on the door, it’s not an easy time for traditional automakers to sell electric vehicles. But Honda is taking it to another level.

This week, Honda discontinued its puny and frankly unpromising EV program. What little motivation Honda had for competing in the EV space is clearly gone, and with it any chance of surviving the current wave of disruption sweeping the industry.

The company blames two easy targets: U.S. tariffs and Chinese competition. But there was no viable EV strategy from the beginning.

Honda kicked things off Thursday by halting development of its first EV, the three-model electric Acura RDX and Honda 0 sedan and SUV, but shared little about it with outsiders. The situation continued on Friday, with Automotive News reporting that Honda will cease production of the Prologue, essentially a vehicle designed and built entirely by GM.

This decision could backfire in a variety of ways, but there are two that I would argue are the most important. By shelving EVs, Honda will be falling far behind the two biggest changes sweeping the auto industry: electric drivetrains and software-defined vehicles.

Missed EV Opportunity

For Honda, and many legacy automakers still in the early stages of the transition, EVs are just cars with different drivetrains. I can imagine Honda executives thinking they can just wait out an awkward transition period and replace the fossil fuel portion once the motor and battery are fully sorted. How hard can it be?

Of course that’s a mistake. Many car manufacturers have discovered that putting batteries in cars originally designed for internal combustion engines doesn’t work well. Although development cycles can be shortened, the end product is heavier, less efficient, and more expensive to produce.

EVs, if developed into unique products, offer automakers an opportunity to rethink their cars and lower their prices in the process.

Take Ford, for example. The Mustang Mach E was a sales success, but not a financial success for Ford. The Mach E is based on a heavily modified version of the platform that underpins the Escape, a fossil-fuel crossover. Ford CEO Chris Farley said in a recent interview that part of the problem is that legacy engineering decisions are holding back products. For example, the Mach E’s wiring harness is 70 pounds heavier than the Tesla’s. Even in a product as complex as a car, such small errors accumulate.

Honda will also miss out on several learning opportunities. In both development and manufacturing, you can learn by doing. We are also learning how to nurture new suppliers and supply chains. You’ll also miss out on important customer feedback: What do people really value about EVs?

Software Defined Vehicle, Sayonara

Here Honda is bracing for the second disruption sweeping the auto industry: the failure of software-defined vehicles (SDVs), whose core features can be upgraded and improved over time.

Consumers who primarily buy EVs from Tesla, Rivian, BYD, etc. have become accustomed to frequent updates, slick infotainment software, and advanced driver assistance systems from Tesla, Rivians, Nio, or Xiaomi. Honda has yet to make significant progress in that area.

SDVs do not have to be EVs, but they tend to be used together. An EV’s larger battery will make it easier to power powerful computers and allow things like over-the-air updates to be performed when the car is parked or turned off. Can Honda make a fossil fuel SDV? Of course. But they are unlikely to step away from EVs for the same reason. Because the traditional way is easier and more profitable at the moment.

What does honda mean?

Honda is facing an identity crisis. At its core, it is an internal combustion engine company. It makes a really good engine, and that’s starting to become more and more important.

Other characteristics of the car are also under attack. For years, the company has prided itself on building cars for drivers. It’s light, efficient and handles well. But what does ‘driver’s car’ mean when a car drives itself?

Autonomy aside, I think the market for driver’s cars is limited anyway. People are drawn to Honda because it is reliable and affordable. The fact that it’s handled well is just icing on the cake, and can even help consumers cut ties if they’re conflicted between the two brands.

But EVs are far more reliable than fossil fuel vehicles, and as Chinese automakers have shown, lower battery prices also lower overall vehicle costs. If Honda can’t compete on reliability or price, consumers will be upset.

That seems to be already happening in China. Honda said this in its latest earnings report: Honda said, “Our competitiveness has declined as we have not been able to provide products that are better for the price than new electric vehicle manufacturers.” Last year, headwinds from China cost the company nearly $16 billion. Without plans for an EV, it’s only a matter of time before Honda suffers the same fate elsewhere.