Honda Puts EVs in the Rearview: Can Hybrids Power the Next Chapter?

Japan’s auto biggie Honda HMC is pulling back on its electric vehicle (EV) plans as global demand cools. Instead, the company is betting big on hybrid cars, aiming to launch 13 new hybrid models globally between 2027 and 2030, including a new hybrid system for large-size vehicles set to debut in the second half of the decade.  Honda currently sells over a dozen hybrids worldwide, though only three models—the Civic, Accord and CR-V—are available in the United States.

HMC is cutting its EV and software investment target by 30%, from 10 trillion yen ($69 billion) to 7 trillion yen ($48.4 billion) by 2030. Honda now expects EVs to account for less than 30% of its production by 2030, backing off its earlier goal. Meanwhile, it plans to sell 2.2–2.3 million hybrids by that year, up from 868,000 in 2024.

This move aligns with the broader industry trend. Global automakers are slowing EV rollouts as governments ease emission targets and hybrids gain popularity. For example, the United States has seen policy reversals under President Trump that weaken EV mandates.

Honda also faces rising pressure in China, where EV adoption is surging under new regulations and strong competition from domestic brands. Internal combustion engine vehicles have become virtually unsellable, contributing to a drop in Honda’s profits in the region.

Honda has only launched two EVs so far—the Honda e in Japan and Europe, and the Prologue SUV in the United States. It also recently paused a $10.7B EV plant project in Canada due to sluggish demand.

Despite the shift, Honda still aims to transition entirely to zero-emission vehicles—including battery EVs and fuel cell models—by 2040. But for now, it’s taking the hybrid lane.

NSANY & TM Also Rethinking EV Strategies

Honda’s closest peers, Nissan NSANY and Toyota TM, are also hitting the brakes on their e-mobility ambitions.

Earlier this month, Nissan scrapped plans to build a $1.1 billion battery plant in Kyushu, Japan, just months after announcing it. The facility was key to lowering EV costs through lithium iron phosphate batteries. Weighed down by declining sales in China and North America, Nissan posted a massive net loss of 671 billion yen ($4.5B) for the fiscal year ended March 2025. Its EV ambitions now face headwinds.

Toyota is also pulling back on its EV targets amid global demand uncertainty. Reports surfaced last September that Toyota would reduce EV production plans by 20%, aiming for 1 million units by 2026 instead of 1.5 million. Although Toyota sold over 10.2 million vehicles in the last fiscal year, just 145,000 were fully electric, around 1% of total sales. With U.S. tariffs threatening profits, Toyota is now “reviewing” its roadmap, and its 2030 EV goal of 3.5 million EV sales is seen more as a benchmark rather than a firm target.

HMC’s Price Performance, Valuation and Estimates

Shares of Honda have gained 3.7% year to date against the industry’s decline of 1.7%.

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From a valuation standpoint, HMC trades at a forward price-to-sales ratio of 0.32, below the industry. It carries a Value Score of A.

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Take a look at how the Zacks Consensus Estimate for HMC’s earnings has been revised over the past 60 days.

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Honda stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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