Honda Motor has announced a major strategic shift, scaling back its electric vehicle (EV) investments and redirecting its focus toward hybrid models in response to waning global EV demand. The automaker has reduced its planned investment in electrification and software by 30%, now budgeting 7 trillion yen ($48.4 billion) by fiscal year 2030.

As part of this pivot, Honda has abandoned its previous goal of having EVs account for 30% of total sales by 2030, now projecting a more modest 20%. This move follows a broader industry trend, as automakers respond to changing consumer preferences and governments around the world relax EV mandates and emissions targets.

Honda plans to launch 13 new hybrid models globally between 2027 and 2030, aiming to sell between 2.2 million and 2.3 million hybrid vehicles annually by the end of the decade—up from 868,000 in 2023. The company is also developing a new hybrid system for large vehicles, expected in the second half of the decade.

The shift has already impacted planned projects, including the postponement of a C$15 billion ($10.7 billion) EV production facility in Ontario, Canada. Despite the near-term focus on hybrids, Honda reiterated its long-term commitment to electrification, maintaining its goal of having all new car sales be battery-electric or fuel-cell vehicles by 2040.

Other automakers, including Nissan, have also pulled back on EV investments. Nissan recently scrapped plans for a $1.1 billion battery plant in Kyushu, Japan, underscoring a growing industry recalibration amid evolving market dynamics.