Honda said despite the shift in strategy, it still aims for all of its global new-vehicle sales to come from battery-electric of hydrogen fuel-cell models by 2040.

Facing slower-than-expected demand for electric vehicles, Honda Motor Co. announced it is cutting its planned investment in EVs and automotive software by nearly one-third—from $69 billion to $48.4 billion—while significantly increasing its commitment to hybrid vehicles over the next six years.

"Based on the current market slowdown, we expect EV sales in 2030 to fall below the 30% that we previously targeted," said Honda CEO during a company briefing. He now projects EVs will represent approximately 20% of the automaker’s global sales by 2030.

It’s a significant shift for the Japanese automaker, which earlier committed to a robust electrification plan, including Level 3 autonomous EVs and a suite of in-house developed battery-powered models. Honda's initial roadmap included the 0 Saloon and 0 SUV, both of which debuted at CES 2024 and are set to begin production next year at Honda’s EV hub in Ohio.

Beyond the flagship 0 series, Honda had hinted at follow-up EVs such as a lower-cost crossover, though those future models may be affected by the trimmed investment. The company has not confirmed whether its U.S. operations will experience any direct changes as a result of the budget reduction.

The financial cutback also comes after Honda put on hold its ambitious $10.7 billion plan to convert its Ontario, Canada, factory into an EV production center, delaying the transformation—and its associated battery and cell plants—by at least two years.

Despite the EV pullback, Honda remains committed to electrification. Under a revised plan, the company aims to launch 13 all-new hybrid models by 2031, with hybrid systems to be integrated into many of its larger vehicles later this decade. Honda anticipates global hybrid sales between 2.2 and 2.3 million units annually by 2030.

Still, the automaker reaffirmed its longer-term goal: by 2040, all of Honda’s new vehicle sales are expected to come from battery-electric or hydrogen fuel-cell models.

Although Honda was one of the early innovators in electric vehicle technology during the 1990s, its EV lineup has remained modest. Currently, it sells only two battery-electric models in the U.S., the Honda Prologue and the Acura ZDX, both developed in partnership with General Motors.