Honda expects hybrid boom to last until end of decade

Honda’s chief executive expects the boom in global hybrid sales to continue to the end of the decade, helping fund its ¥10tn ($65bn) investment plan to expand electric-vehicle production.

At a news conference on Thursday, Toshihiro Mibe said the company would stick with its target to phase out petrol and diesel cars by 2040, one of the most ambitious of Japanese carmakers.

Carmakers around the world are increasing their investment in hybrid models, with some delaying longer-term EV targets, as consumers turn away from fully electric cars because of higher costs and concerns about charging infrastructure. 

Industry executives and government officials remain divided about whether slowing sales of electric cars in the US and Europe and increased interest in hybrids are temporary trends. 

“We think the peak in hybrid [sales] will come in 2029 or 2030, and we are considering how to address that increase in volume,” Mibe said. “By the latter half of the 2020s, we will advance hybrids to another level.” 

Executives from General Motors, Nissan, Hyundai, Volkswagen and Ford told the Financial Times’s Future of the Car Summit last week that tapping into resurgent demand for hybrids was a priority.

Many hybrids make carmakers double-digit returns, compared with often loss-making electric cars.

Mibe said Honda would roll out new hybrids that will be smaller, more energy-efficient and cheaper to build, in order to generate cash to expand its EVs business.

The surge in demand for hybrids — which combine a battery with a combustion engine — has allowed carmakers that have invested in the technology to continue to make profits from their existing models.

Honda expects its sales of hybrids to increase to 1.8mn a year by the end of the decade, compared with about 850,000 vehicles in the last financial year. 

It will also aim to roll out seven new EV models and produce more than 2mn EVs by 2030, representing about 40 per cent of its global auto sales.

The company has doubled its spending plan for the end of the decade to ¥10tn. Part of this will be used to build new plants and cut the cost of manufacturing EV batteries. 

Last month, Honda said it planned to invest $11bn, with partners, to build EV and battery plants in Ontario, its biggest investment in Canada.

Toyota, one of the biggest manufacturers of hybrids, recently said that it aimed to increase spending on new technologies — such as artificial intelligence, EVs and software — by more than 40 per cent, while sales of hybrid cars helped boost its profits to record levels.