Honda Realigns Around Hybrids, BEVs, Tougher SUVs and Better Quality

It’s difficult to wrap one’s head around the fact that Honda is having to play catch-up in the EV space. But it is.

Or is it? The Japanese car company, arguably the best powertrain-making company in the world, announced this week a management change at the top of its U.S. operations, and a realignment of business – all designed to optimize its future in EVs and digital engineering.

Looking at the 10 top sellers of EVs in 2022 in the U.S. and globally, Honda is conspicuously on neither list. After you get past the Tesla Model Y and Model 3 as the top two sellers in the U.S., you get to Ford, Chevy, Hyundai and Kia. But no Honda or Acura.

This is the company that introduced the first hybrid car in the U.S, the Insight, in 1999, and then watched its first-to-the-party status get squashed by rival Toyota when the latter came to own the category with its Prius franchise. Honda executives were left looking at its weird, homely Insight like a parent looking at their kid’s Cub Scout Pinewood Derby car whittled with a butter knife.

Now, the company seems poised to assert its powertrain prowess in the EV space, as well as the not-dead-yet hybrid category, like the Incredible Hulk busting out of Bruce Banner’s street clothes.

On April 1, Dave Gardner, longtime executive vice president  of National Operations retires to give way to Mamadou Diallo, who becomes senior VP in charge of sales for both the Honda and Acura brands. Moreover, Honda is establishing a new Integrated Digital Services and Marketing Unit to lead the company’s digital transformation.

What does it mean? Diallo announced one small move coming: the entirely digital transaction for buying the Acura ZDX BEV, a move Honda has negotiated with its dealers, who will still hand over the keys to ZDX customers. Honda is further behind than they think. Many automakers and their dealerships converted to transacting fully online during the COVID-19 pandemic.

The Push for Hybrids, BEVs and Better Quality

Honda figures, like many other automakers, to be selling nothing but BEVs by 2040. And it plans to be a net-zero-emissions company by 2050.

But as Honda wades into EVs with both feet with its Honda and Acura brands, it has several performance and brand confidence issues it must address.

Historically, Honda has been viewed by customers and even non-customers as a high-quality manufacturer of vehicles and powertrains. Hondaphiles are known for not only owning Honda vehicles, but lawnmowers, generators, garden equipment, motorcycles, scooters, boat engines and so on—all with the reliable motors for which Honda is known.

But in all the major studies and rankings by J.D. Power, Honda and Acura rank below the industry average.

American Honda spokesman Carl Pulley says in the case of Power’s annual Initial Quality Study, Honda had an unfortunate run of being at the end of product cycles when interior-design norms were changing. “That study has really become one of user interface, and we, for example, have replaced previous touchscreen functions with actual knobs that are preferred.”

However, Honda also ranks below average in J.D. Power’s Vehicle Dependability Study, which measures customer satisfaction and quality over three years; Sales Satisfaction Study, which measures how good the sales/dealership experience was; and Customer Service Index.

“We recognize that these are metrics we need to improve on,” and that has been communicated throughout the manufacturing, engineering and design organizations, says Pulley.

Honda’s scores were hurt by several issues. The company recalled 1.79 million vehicles to cover issues with software, driveshafts that were vulnerable to breakage and overheating window switches. There also have been issues with the Honda Sensing safety suite of features, with complaints from customers that the emergency braking engages without warning when there are no obstacles in front of the vehicle.

Even the automaker’s vaunted powertrain perfection took a nick in 2019 when the company’s 1.5L direct-injected turbocharged 4-cyl. required updates to prevent excessive gasoline dilution in engine oil. The company eventually updated software on 400,000 vehicles fitted with the “Earth Dreams” engine and extended warranties on certain engine parts to reassure owners.

J.D. Power’s Kristin Kolodge, vp and head of Auto Benchmarking and Mobility Development says that the firm’s studies, based on customer surveys, are as much about actual performance as they are about over-achieving or under-achieving expectations. “What shows up on our studies and rankings reflects the voices of the customers,” says says. Indeed, while Honda has a longer established track record of pleasing its customers, it has also been beaten badly on these studies by Hyundai and Kia, as well as archrival Toyota.

Hybrids to EVs

As far as moving more aggressively into BEVs, Honda is trying to clean up a kind of scattershot approach it has taken. It has a partnership with General Motors for two BEVs based on GM's Ultium battery platform and architecture, both built at a GM plant.

It has another partnership with Sony, the first concept vehicle of which was shown at CES 2024 this month and will be marketed under a new brand, Afeela.

And the company is working on its own e-architecture that will likely underpin most of its future BEVs.

Honda sales were hammered in 2022 as it tried to bring out several new products that all required more semiconductor chips than those they were replacing. Diallo says the supply-chain issues around chips have improved, “but we are not out of the woods yet.” Still, he projects a 25% sales gain this year for Honda and Acura vehicles combined. “We have a lot of pent-up demand,” especially from repeat customers, says Diallo.

With gas prices still above $3.00 in most parts of the country, and higher in some states like California, fuel economy is an issue, especially among Honda’s traditional customers – educated, but not necessarily highly-paid professionals – teachers, social services workers, office support workers, etc.

Part of meeting pent-up demand is increasing its hybrid vehicle offerings and volumes that it sees as a forgotten (by some) bridge to BEV ownership, while providing far better fuel economy than internal-combustion vehicles.

The new 40^th anniversary Accord, for example, comes with a hybrid trim that gets 51 mpg city/44 mpg highway (4.6/5.3 L/100 km), and Diallo says it will be 50% of volume.

That is a far cry from the Accord Hybrid of a decade ago, which was sneered at for getting a paltry 23 mpg city/33 mpg highway (10.2/7.1 L/100 km).

The CR-V, also offering a hybrid version, has been among the leaders in the CUV segment since 1997. Later this year, Honda will launch an all-new Civic sedan and hatchback, also with a hybrid powertrain

While Honda acknowledges that sedans are taking a backseat to CUVs and SUVs, Diallo says “sedans still matter to us.” He points to the preference for sedans by younger, first-time buyers, and buyers from nonwhite multicultural backgrounds. The Civic, for example, claims Honda, has been the No.1 new-car choice for first-time car buyers for several years (though it is outsold overall by Toyota Corolla)

Not resting in the CUV category, Honda has been extending its TrailSport package and badging to Passport and Pilot. The TrailSport trim – higher ground clearance, bigger wheels and tires, off-road suspension, underbody protection, off-road enhancements and orange stitching and badging – has been a hit with buyers and is widely expected to be extended to the Ridgeline pickup in future.

Honda turning to Sony as a full partner in developing the Afeela BEV was a good idea to be schooled by one of the world’s leading designers and developers of entertainment and devices. Honda has long been a laggard in figuring out timely and useful human-machine-interface design.

Consumers of BEVs are going to need a lot of hand-holding, education and support as they transition from driving ICE vehicles to ones that need plugging in. That requires trust. And despite Honda’s tumble in quality rankings, Consumer Reports ranks the brand just fifth behind rival Toyota/Lexus, BMW and Mazda.

For a lot of owners of multiple Honda products, that perception of trust should keep minds and wallets open as the company trots out its stable of BEVs going forward.