Honda Realigns U.S. EV Strategy, Halting Development of Larger Electric SUV Amid Policy Shifts
Key Insights
Honda has canceled plans for a larger electric SUV in the U.S. market, instead prioritizing hybrid vehicle development.
The decision is driven by anticipated lower EV demand, influenced by the impending rollback of federal tax credits.
This strategic pivot aligns Honda with other major automakers, including Ford and Toyota, who are also adjusting their U.S. EV product strategies.
Despite the cancellation, Honda's current EV models, such as the Prologue and Acura ZDX, continue to demonstrate strong sales performance.
Honda Motor Co. has reportedly halted plans for a larger electric SUV intended for the U.S. market, signaling a strategic pivot in its electrification roadmap. This decision, disclosed in a recent Nikkei report, aligns Honda with other major automakers, including Ford and Toyota, who are similarly adjusting their electric vehicle (EV) strategies in response to evolving market dynamics and policy shifts.
The Japanese automaker's revised approach is largely attributed to an expected slowdown in EV demand, particularly following the anticipated rollback of federal tax credits. While Honda's inaugural electric SUV, the Prologue, has demonstrated strong sales performance in the U.S. market, the company is now channeling its resources towards hybrid vehicle development, a move that provides greater flexibility in a fluctuating regulatory and consumer landscape.
The larger electric SUV, which was slated for a 2027 release, would have competed in the same segment as upcoming three-row EV SUVs from Ford and Toyota. Despite this cancellation, Honda remains committed to its '0 Series' electric SUV and sedan, which are still on track for launch next year. A camouflaged prototype of the midsize electric SUV from this series was recently observed during testing in Tokyo, indicating ongoing development.
Earlier this year, Honda announced a reduction in its planned EV investments by approximately $21 billion through 2030, citing lower demand forecasts. This recalibration underscores a broader industry trend where manufacturers are balancing ambitious electrification targets with market realities and the need for immediate profitability.
In terms of current market performance, Honda has sold over 16,300 Prologue units in the U.S. during the first half of the year, outperforming Toyota's bZ4X, which sold just over 9,200 units in the same period. Furthermore, Acura's ZDX EV, built on the same platform as the Cadillac Lyriq, has exceeded internal sales expectations, with 10,355 units sold in the first half of 2025, significantly outpacing initial projections of around 1,000 units per month.
The industry is bracing for potential market disruptions as changes to federal EV incentives are implemented, which could impact consumer adoption rates and the competitive positioning of the U.S. market against global leaders like China. Honda's strategic shift reflects a cautious yet adaptive response to these anticipated challenges.