Honda and General Motors (GM) have chosen to end their partnership aimed at jointly developing affordable electric vehicles (EVs).
This decision comes just a year after the two automotive giants had announced their collaboration with a $5 billion investment in an effort to challenge Tesla's dominance in the electric vehicle market.
The primary reason behind this shift is GM's strategic decision to prioritize profitability over the rapid launch of several EV models.
This shift in priorities was influenced by the rising costs associated with United Auto Workers strikes which were costing the company an astounding $200 million per week as of late.
GM also recently withdrew its profit forecast for the year 2023 indicating a change in their focus.
Both companies issued a joint statement explaining their decision, "After conducting extensive research and analysis, we have mutually agreed to discontinue the program. However, both companies remain committed to providing affordable EVs."
It's worth noting that Honda has not wavered in its commitment to selling only electrified vehicles by the year 2040.
GM emphasized that despite the end of their EV collaboration, there are still ongoing projects between the two companies.
The financial markets responded with relative stability as GM's stock remained nearly unchanged at $28.52 during pre-market trading and Honda's stock closed with a modest 0.8% increase in Tokyo before the decision was announced.
The partnership between GM and Honda, established in April the previous year, had set out to develop a range of reasonably priced EVs based on a shared platform with the potential to manufacture millions of electric cars starting from 2027.
The goal was to offer affordable EVs, including compact electric crossover vehicles, leveraging GM's Ultium battery technology.
However, after a year of careful consideration, both companies reached the conclusion that this venture would present significant challenges.
Honda's CEO, Toshihiro Mibe, described it as a tough business decision.
Notably, Honda's separate partnership with GM and its Cruise unit remains unaffected by a recent safety incident in California where Cruise had to suspend its driverless testing permit due to concerns about public safety and misrepresentations regarding the technology.
Just last week, Honda revealed its plan to establish a joint venture with GM and Cruise in the first half of 2024.
The venture's goal is to launch a driverless ride service in Japan by early 2026.
