Honda Is Finally Getting Serious About Electric Cars

Investors have been wondering when Honda (NYSE: HMC) would get with the electric-car program, and now there's an answer. At the International Motor Show in Frankfurt, Honda's CEO unveiled a show car called the Urban EV Concept -- and said it previews a new electric Honda that will debut in 2019.

About the Honda Urban EV Concept

"This is not some vision of the distant future," Honda CEO Takahiro Hachigo said, with the grandiose promises of some rivals clearly in mind. "A production version of this car will be here in Europe in 2019."

Honda CEO Takahiro Hachigo with the Urban EV Concept, a preview of a new electric car that Honda will launch in 2019. Image source: Honda Motor Co., Ltd.

Honda didn't give much in the way of details that electric-car fans will want most. We don't yet know the size of its battery, its expected range, whether it has more than one motor, or what it will cost. It's possible that Honda hasn't yet decided on the production version's capabilities, or that it plans to offer different configurations in different markets around the world (or both).

But we do know that the Urban EV Concept is built on a completely new platform, one that Honda has created specifically to underpin a new series of electric vehicles. 

We also know that while it's not quite as tiny as the vintage Honda Civics that its styling recalls, it's pretty small by modern standards. Honda said that the Concept is 100 millimeters shorter than its Jazz subcompact. (The Jazz is the European version of the Honda Fit. Like the Fit, the Jazz is small. But the Urban EV Concept is smaller.) 

Inside, the Urban EV Concept has more room than you might think from its exterior dimensions. There are two bench seats, with enough room to seat four adults. It's similar to the interior configuration chosen by General Motors (NYSE: GM) for its Chevrolet Bolt EV, another vehicle that has more room inside that its exterior dimensions suggest. That's no surprise given that the Honda has a similar configuration and a similar mission: Like the Bolt, the Honda is intended as a small urban runabout that's easy to park and maneuver.

The interior of the Honda Urban EV Concept is show-car fancy. The production version's dash will probably look more conventional. Image source: Honda Motor Co., Ltd.

Why it's important: Honda is taking a bigger step into electric vehicles

Until now, Honda's electric-vehicle efforts haven't been all that impressive. In fact, they've been downright disappointing to longtime Honda fans: The company's sole battery-electric offering in the U.S. is a version of its Clarity sedan that offers just 89 miles of range. That's not nearly enough to make it competitive with vehicles like the Bolt and Tesla's (NASDAQ: TSLA) Model 3, a surprise given Honda's long and much-admired history of innovation. It hasn't helped that Honda's self-driving efforts also appear to be running behind those of rivals. 

The Urban EV Concept is a tangible sign that Honda is stepping up its electric-vehicle game at last. Honda has said that its goal is to have "electrified vehicles" (meaning pure electrics and hybrids) make up two-thirds of its global automobile sales by 2030. (It hopes to hit that goal in the European market by 2025.) This concept car, and the stated production plans, show that Honda is now serious about building competitive electric vehicles. 

Will the production version of Honda's Urban EV Concept come to the U.S.?

That's not clear yet. So far, Honda has said only that it will be sold in Europe starting in 2019. But Honda's business plan, summarized by Hachigo in a presentation earlier this year, suggests that its new EV will be sold in many parts of the world.

Long story short: It's not confirmed yet, but Honda will probably offer it in the U.S. I suspect we'll hear more details at the Los Angeles International Auto Show in November.

Will it sell?

That will depend to some extent on the details, specifically its range and price. But I think while the car's retro-futuristic styling theme is obviously exaggerated in a show-car way, the basic theme Honda chose for the car is pitch-perfect -- a futuristic take on its fondly remembered early cars from the 1970s. It has the potential to do quite well. 

What does it mean for investors?

The takeaway here is simple: Don't count Honda out of the electric-car race. Although it seems a little late to the game, that probably won't matter much in the long run. Expect Honda's electric vehicles to be technologically competitive, packaged in ways that longtime Honda fans and casual buyers alike will find compelling, and priced to sell. 

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