#2-71 Honda's Strategic Crossroads: Navigating the EV Transition through Realism and Partnerships

Executive Summary:Honda Motor Co., Ltd. (hereinafter referred to as "Honda") revealed a significant "course correction" for its future in the "2025 Business Update" announced by President Toshihiro Mibe on May 20, 2025. This report provides a comprehensive analysis of the latest information one month after this announcement and the June shareholders' meeting, to predict Honda's future trends.The core of this analysis is Honda's shift from its previous ambitious single-minded focus on electric vehicles (EVs) to a more realistic and diversified strategy. This new strategy centers on "intelligence" (知能化), significantly strengthening its lineup of profitable hybrid electric vehicles (HEVs), while redefining its EV portfolio to be more selective and focused. This strategic shift is driven not only by external environmental changes such as the global slowdown in EV market growth and regulatory changes, but also by internal factors such as pressure from the capital market to improve profitability, symbolized by the low PBR (Price-to-Book Ratio).Of particular note is the plan to position HEVs as a "fortress of profit" in the key North American market. The abundant cash flow generated there is intended to be directed towards massive investments in "intelligence" technologies, exemplified by next-generation ADAS (Advanced Driver-Assistance Systems) and their proprietary OS, "ASIMO OS". This represents Honda's strong determination to challenge emerging players like Tesla and China's BYD, who are leading in EV competition, not merely on the battlefield of powertrain, but on a new playing field of "Software-Defined Vehicle" (SDV), where software defines the car's experience value.On the other hand, a major uncertain factor that will determine the success of this grand strategy is the future of the collaboration with Nissan Motor Co.. This alliance, which initially promised significant synergies such as the commonization of core EV components and joint development of SDV platforms, now faces an unclear future after discussions for a management integration broke down. Currently, the collaboration remains limited to "loose cooperation" in specific areas, and it is uncertain whether this will lead to concrete cost reductions or accelerated development.Such strategic shifts and uncertainties are clearly reflected in the stock market's reaction. Honda's stock price remained sluggish throughout June, and the shareholders' meeting saw a series of tough questions regarding the low profitability of the four-wheel business and the progress of the collaboration with Nissan. While the market largely understands Honda's realistic strategic shift, it maintains a "wait-and-see" stance, awaiting concrete results regarding its execution capabilities and future profitability improvements. This report analyzes these trends from multiple perspectives, clarifying the challenges and opportunities Honda faces.

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