TOKYO — Honda Motor Co., ever the go-it-alone carmaker, is confronting an era of rapid industry change, and CEO Takahiro Hachigo is pioneering a strategy for it.
Japan's No. 3 automaker is forging partnerships to tackle everything from next-generation drivetrains to autonomous vehicles and artificial intelligence.
Hachigo, 58, wants electrified vehicles to account for two-thirds of Honda's global sales by 2030. And that will mean a huge ramp-up of hybrids, plug-ins and EVs in the United States.
The U.S. remains Honda's biggest and most important market. But today, electrified vehicles make up only 2 percent of its U.S. volume.
Meanwhile, Honda has competing U.S. priorities, including boosting light-truck sales. Crossovers and pickups accounted for just 51 percent of American Honda's sales through November, while the red-hot segment drove 64 percent of total volume industrywide.
Through an interpreter, Hachigo spoke this month with Asia Editor Hans Greimel about plans to increase light-truck supply, thoughts on partnerships and the outlook for EVs.
Q: What is Honda's outlook for the overall U.S. auto market in 2018?
A: I believe it will be more or less equal to this year. Rather than seeing growth, I think we will be seeing a stable or equivalent level of sales next year.
And what is Honda's outlook for its own U.S. sales in 2018?
The Accord full model change has taken place and next year will be the first full year with the new generation. Also in light trucks, we are capable of doing more local sourcing. So I think we will be capable of achieving sales that are a bit higher than this year's sales.
What will Honda do to increase supply of light trucks?
We understand demand is increasing year over year. I think we have the right products in place in our lineup. And we have been able to achieve a flexible production system. So next year for sure we believe we can grow our light-truck sales.
Light trucks account for 51 percent of Honda's U.S. sales. What balance are you targeting?
We would like to see the percentage increase a bit more. We have a flexible production system where it is possible to switch production between light trucks and passenger cars. Using this, we want to further advance our sales of light trucks.
Does Honda have enough factory capacity in North America?
It would be slightly desirable if we had more supply. But currently we aren't thinking of making any changes. We see potential for light truck sales to grow. But there is uncertainty in the future for passenger cars. Therefore, it is desirable to add flexibility to our production system. In the U.S., we are expecting the light-truck ratio to continue to increase.
Which vehicles does Honda need more of?
We have expectations that sales will grow for both the CR-V and HR-V.
Light-truck sales at Acura are down. Why hasn't Acura captured that demand?
When it comes to the RDX and MDX lineup, I don't think we are mistaken when it comes to the positioning. But it is a fact that we are seeing some changes in the sales volume. So we are trying to reflect the voices of our customers into models with minor model changes and the like. Through such responses, we are confident the RDX and MDX will be able to grow.
Honda expects electrified vehicles to account for two-thirds of its global sales by 2030. What will Honda's U.S. lineup look like then?
Globally speaking, about 50 percentage points of the two-thirds target will be achieved through hybrids and plug-in hybrids. And 10-15 percentage points will be ZEVs, such as EVs.
So given the fact that the U.S. is our biggest and most important market, we would like to achieve this two-thirds even in the United States.
The main players making this happen will be hybrids and plug-in hybrids. But there is also the ZEV. I think it will have to achieve 10 percent in the United States.
Is Honda optimistic about a battery breakthrough in the early 2020s, when some believe solid-state batteries will be possible?
We don't think we will be in a position to directly produce batteries. The main technology is being worked on by battery manufacturers. Looking at these efforts, I think there is a possibility for such a breakthrough. But even though that may happen, is there really going to be demand for battery-electric vehicles? That is something very difficult for us to judge right now.
A battery breakthrough wouldn't spur demand for EVs?
It really depends on how far that battery breakthrough goes. The key factors are cruising distance, production capacity and pricing. If it's really cheap, there could be significant growth in sales.
What is Honda's projection for battery cost reductions?
Internally, we have targets. But we are working with suppliers, so I can't give the answer by myself.
But looking to 2025 or 2030, a number of things have to be done. One is lowering cost. And one technical challenge on our side is to try to make it possible to produce gasoline engine cars, hybrids, plug-in hybrids and battery EVs in the same way at the same factory. The biggest challenge for us is how to make that happen.
When will Honda localize hybrid production in the U.S. and reach serious scale?
To sell in the U.S., we want to supply from the U.S. So we are trying to make efforts to achieve that as soon as possible. The next Accord Hybrid will be produced in the U.S.
Will Honda's big vehicles such as the Pilot SUV or Ridgeline pickup have electrified versions?
We have to think about the extension of the current lineup when offering electrified models. I can't say for sure that we will have such electrified versions. But that is the direction in which we are considering various possibilities. Given the size of the vehicles, I think it would be hybrid or plug-in hybrid. I do think those are possibilities given our target of two-thirds electrification by 2030. We are looking into such a possibility.
Will Honda's pace of partnering speed up in 2018?
Things are changing drastically. So, we should not be late in responding to such changes. We will continue in the future to seek win-win partnerships. We want to build such partnerships speedily.
What about capital alliances with companies?
The answer to that is no. We don't have any plans to hold equity in any car manufacturer. For example, we are working with General Motors. But this is on fuel cell technology. And we have jointly established a production company for fuel cells. So for specific technologies and specific segments, yes. But it's not the case where we have any plans for such equity holdings.
What is Honda's biggest strength in this new era?
The fact we're doing not just automotive but motorcycles, power products and more. And we have as many as 30 million customers buying our products in these categories. We have been focusing on these businesses globally. We have a cross-regional, cross-border business. We want to further evolve this and seek growth so that we can survive.