Honda increases R&D spending to boost hybrid push

Japan’s Honda Motor has stated that it plans to increase its research and development (R&D) spending by about 25% in the current financial year, in order to strengthen its position in the market of hybrid and other electrified vehicles. It forecasts a growth of 2.8% in operating profit for 2024/25. Being the second-largest automaker in terms of volume in Japan, Honda reported a buyback program worth up to 300 billion yen (USD 1.93 billion) after surpassing the analysts’ expectation for fourth-quarter earnings.

The resilient income growth in the US market coupled with the slowdown in sales pace from the Chinese market contributed to this good performance. These two factors along with the positive impact of the better–off currency exchange rates and the high sales of hybrid models lifted Honda’s profitability.

The company forecast full-year operating profit would rise to 1.42 trillion yen compared with an average profit estimate of 1.39 trillion yen in a poll of 22 analysts by LSEG. Though Honda has been late to the EV party, it now plans to spend 1.19 trillion yen for research and development this year, up 23% from the previous year. The company’s CEO Toshihiro Mibe told reporters, “Our current plan is to create an environment that allows us to produce 2 million hybrid models in a year by 2030, and we have been planning our business strategy taking into account necessary investment.”

Mibe said he is seeing “good progress” in ongoing talks with rival Nissan over a possible partnership to collaborate on producing EV components. He hopes to update the market in the near future. Honda’s operating profit for the three months to March 31 grew more than six-fold from a year earlier to 305.6 billion yen, well ahead of the 248.3 billion yen average expected by nine analysts.

The developments come at a time when carmakers are focusing more on hybrid vehicles as sales of fully electric vehicles are slowing down. For example, Korean automaker Hyundai Motor recently said that it plans to use investment already lined up for the US to produce hybrid vehicles at its electric vehicle plant there.