Honda and Sony's New EV Has Already Accumulated Over $360 Million in Losses Before Its Launch | Carscoops

      Despite not having released its first vehicle yet, the joint venture between Honda and Sony is already experiencing significant financial losses.

      The Afeela EV initiative has resulted in a loss of ¥52 billion ($362 million) for Honda and Sony. In the previous year, Honda Sony Mobility reported a loss of ¥20.5 billion ($143 million). Analysts express concern that this might indicate the difficulties associated with entering the luxury electric vehicle market.

      Ten years ago, a collaboration between Honda and Sony would have likely led to a Gran Turismo concept at best. Nowadays, it has evolved into the sleek Afeela Joint EV project. However, there is a significant issue: Sony Honda Mobility has reported an operating loss of about $362 million (¥52 billion) before even selling a single vehicle.

      This situation extends beyond mere pre-launch development costs. Recent financial statements reveal that losses have more than doubled compared to last year’s shortfall of ¥20.5 billion, emphasizing the high expenses involved in competing in the premium EV market. The Afeela, which is expected to launch later this year, will start at a price of $89,900, indicating the target market of the joint venture and the challenges associated with recovering such substantial initial investments.

      A Daunting Entry

      Most new car launches will initially incur losses; this is almost guaranteed. Given that Honda and Sony appear to have considerable financial resources (the two companies reported over ¥2.6 trillion in operating profit last fiscal year), it is improbable that this project will jeopardize their financial stability.

      However, the market that Afeela is about to enter presents its own challenges. Analysts note that luxury electric vehicles, while appealing to affluent consumers, usually entail high development costs, including extensive research and development, complex software systems, and costly prototype creation. Bloomberg Intelligence analyst Tatsuo Yoshida mentions that while the Afeela's high price tag aims to counterbalance these expenses, it may be difficult to fully recover these hefty costs solely through sales.

      Late to the Game

      Adding to the obstacles, the Afeela will enter a market already occupied by established brands like Tesla, Mercedes-Benz, BMW, and others (not to mention Chinese manufacturers), making it even more challenging for Sony and Honda to establish their unique presence. Nevertheless, both companies are optimistic, relying on Honda’s established engineering skills and Sony’s expertise in software and entertainment technology to attract consumers.

      Regardless of whether the Afeela turns out to be a success or merely an ambitious attempt, the venture underscores a clear point: even for industry giants like Sony and Honda, transitioning to electric luxury is neither an easy task nor a cheap endeavor.