UK Markets closed

Honda’s call to quit UK makes perfect sense as electric-car age looms

Jill Petzinger
Jill Petzinger, Germany Correspondent, Yahoo Finance UK
The Honda plant in Swindon, which the company is planning to close in 2021. Photo: Steve Parsons/PA Wire.

Honda’s announcement this week that it was shutting its Swindon UK factory as part of a move to “accelerate its commitment to electrified cars” and “not because of Brexit” was met with scepticism and even anger in Britain.

The company had said in September that it was committed to Swindon, but warned of the exorbitant costs it would face in the event of a no-deal Brexit.

“How are Honda supposed to calculate the costs and benefits of staying in the UK in the overall global context against such lack of clarity on the future terms of trade?” Sir David Warren, former British ambassador to Japan, told the Guardian.

While it may have been diplomatic, or polite, to deny the decision was Brexit-based, Japanese companies in Britain have been warning loudly for years that Brexit will hurt their businesses. Deal or no-deal, Honda won’t need Britain as a gateway to the EU market, as Japanese carmakers have done since the 1980s. Tokyo’s new trade deal with the bloc means they will be able to export their vehicles to the EU tariff-free in the future.

Read more: Honda’s plant closure puts 7,000 car industry jobs at risk

For Honda, the threat of Brexit is dwarfed by the more worrying advent of the electric-vehicle age, which is sending automakers intent on survival scrambling to develop electric cars as fast as possible.

Honda has been regarded as somewhat of a laggard in terms of mass battery-car development. Out of the Japanese car giants, Nissan’s Leaf holds the crown for the most popular electric car of all time, selling over 360,000 units as of the end of last year. Honda launched the Insight hybrid just ahead the Toyota Prius, in 1999, but it was the Prius that went on to global triumph.

Honda has produced some other plug-ins in the last two decades, like the Fit, and a plug-in Hyrbid version of the Accord, but has spread its bets on hydrogen fuel cell at the same time. Out of its current Clarity series, which comes as plug-in hybrid (PHEV), fuel cell, and battery versions, the PHEV topped those sales charts in the US in December.

Honda says it wants electric cars to make up two-thirds of European sales by 2025. Currently, however, the company makes just 3% of its global sales in the EU, and sells just two electric models, the CR-V Hybrid, which is produced in Japan, and the NSX sportscar, produced in the US.

The company declined to comment on future EV production locations or investment levels to Yahoo Finance, however, president and CEO Takahiro Hachigo, told Autoweek in June 2017 that “by 2030, we would like 65% of our total sales to come from electrified vehicles of some sort.” 

Other global car brands have been open about the huge amounts of money they’ve earmarked for the switch to electrification. Ford last year said it plans to invest $11bn in electric cars by 2022, and add 40 hybrid and fully electric vehicles to its model lineup. Reuters recently reported that Volkswagen is going all in, ring-fencing a whopping €80bn (£69bn) for the transformation, and says it aims to produce 3 million electric cars annually by 2025.