Honda has just announced that it will phase out vehicles that are totally powered by an internal combustion engine (ICE) in Europe in 2022. From that point on, the Japanese carmaker will only offer battery-electric or hybrid models for this regional market. Honda is already having trouble complying with the European standard for carbon emission, and it will ultimately have to make a full transition from engines that run on gasoline and diesel to powertrain systems that are carbon-neutral.
Ian Howells, senior VP of Honda’s European operation, confirmed his company’s plan to stop selling ICE vehicles in Europe within the two-year period when he was interviewed by media outlet Autocar in early December. With this move, Honda seems to abandon fossil fuels at least when it comes to marketing in Europe.
Honda and Toyota as the major carmakers from Japan are lagging behind competitors in the market for battery-electric vehicles. While Toyota still has impressive sales numbers for its hybrid models, Honda lacks growth even in this market segment. Also, Honda is having difficulties in conforming to the European standard for carbon emission since gasoline models make up a significant portion of its offerings.
The Honda e, which is a battery-electric subcompact car, has been available in Europe since this August. However, InsideEVs has reported that only around 1,000 units of the Honda e have been sold in Western Europe so far. Honda’s competitors have already seized the initiative and are offering better-performing models. With sales of its electric cars growing slowly, Honda continues to exceed the mandated level of the average carbon emission for new cars in Europe. To avoid being hit with huge fines levied by European regulatory authorities, Honda has joined the carbon trading market and purchased carbon credits from Tesla.
The CO2 limit for new passenger cars operating in the European Union is now 130 grams per kilometer. Quite a few of Honda’s mainstay models are unable to meet this requirement. The Honda Fit produces 151 grams per kilometer, while the Honda Civic produces more than 160 grams per kilometer. Honda’s sports cars and sport utility vehicles far exceed this limit as well. Consequently, the carmaker is now facing hundreds of millions of euros in fines due to these models failing to comply with the regional standard.
The CO2 limit will drop significantly to just 95 grams per kilometer next year. At this level, even the hybrid variant of the Honda Accord will not make the cut. Assuming that Honda’s vehicle sales in Europe will remain fairly constant in the future, then the penalties incurred by the carmaker is expected to surpass the threshold of 1 billion euros in 2021.
Europe now accounts for merely 1% of Honda’s vehicle sales, with the annual figure averaging around 100,000 units. Since this region is not a major market for the carmaker, it would be unwise to keep paying fines for failing to meet the emission standard. As a temporary solution, Honda is purchasing carbon credits from other carmakers such as Volvo and Tesla. However, prices of carbon credits are rising as well. Honda therefore have to stop selling ICE vehicles in Europe in order to cut its losses.
According to reports from various media outlets, Honda plans to withdraw its diesel models from Europe next year. The withdrawal of gasoline models will follow afterwards. Starting in 2022, Honda will only sell battery-electric and plug-in hybrid models. If the carmaker succeeds in making this complete and rapid transition, then it may end up having a surplus of carbon credits after the two-year period. The situation could then be reversed, with Honda selling carbon credits to other carmakers that primarily offer ICE vehicles.
The Honda e is currently the only battery-electric model from Honda. There is also the Honda Fit Hybrid (a.k.a. the Honda Jazz Hybrid) that is being touted as having attained a very low level of carbon emission. There are reports that Honda will launch another battery-electric model in 2022. According to a conservative projection, Honda’s vehicle sales in Europe could drop by at least 50% from its current level over these two years.
(Photo credit: Honda.)