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Honda Motor Co., Ltd.: The Power of Dreams
How a post-war bicycle motor shop became a global mobility empire—and why its greatest test may lie ahead
I. Introduction: A Company Built on Defiance
In the humid summer of 1949, two men with starkly different temperaments met for the first time in Tokyo. One was a restless engineer with oil permanently stained under his fingernails; the other, a shrewd businessman who understood that great machines need great markets. Together, Soichiro Honda and Takeo Fujisawa would build something unprecedented in Japanese corporate history: the only major Japanese automaker without ties to pre-war manufacturers—a true startup story.
What emerged from that partnership now stands as a monument to unconventional thinking. Honda has been the world's largest motorcycle manufacturer since 1959, reaching a cumulative production of 500 million motorcycles as of May 2025. It is the world's largest manufacturer of internal combustion engines measured by volume, producing more than 14 million units each year. The company builds everything from lawn mowers to private jets, from humanoid robots to Formula 1 engines that have powered seven world championships.
The central question that animates Honda's entire history is deceptively simple: How does a company born in a wooden shack, working with surplus radio generator engines in devastated post-war Japan, transform itself into a $140 billion global mobility empire? The answer lies not merely in engineering excellence—though Honda has that in abundance—but in a distinctive corporate DNA that prizes individual initiative, racing-derived innovation, and an almost stubborn refusal to accept conventional wisdom.
Today, that DNA faces perhaps its greatest test. Honda had a tough year in China, with sales dropping 30.9% to 852,269 units in 2024. The company's net profit has declined significantly amid the electric vehicle transition, and a dramatic attempt to merge with Nissan—which would have created the world's third-largest automaker—collapsed in February 2025. As Chinese competitors like BYD flood global markets with affordable EVs, Honda must once again prove that it can reinvent itself against the odds.
This is the story of dreams, disasters, and an engineer who chased a car down a dusty road when he was just a boy—and never stopped running.
II. Founder Origins: The Making of Soichiro Honda
The defining moment of Soichiro Honda's life arrived on a rural road in Shizuoka Prefecture around 1913. A seven-year-old boy, the son of a blacksmith, stood transfixed as something remarkable passed by: an automobile. "I could not understand how it could move under its own power," Honda later recalled. "And when it had driven past me, without even thinking why, I found myself chasing it down the road as far as I could run."
Honda was born on November 17, 1906, in KĹŤmyĹŤ village, near Hamamatsu. He spent his early childhood helping his father, Gihei Honda, a blacksmith, with his bicycle repair business. At the time, his mother, Mika Honda, was a weaver. Honda was not interested in traditional education. His disregard for formal schooling extended to creative deception: when his school required grade reports to be returned stamped with the family seal, young Soichiro created a stamp to forge his family seal out of a used rubber bicycle pedal cover.
This early anti-authoritarian streak would define his career. In later life, he would often say that he could never forget the smell of oil from that first automobile, saying it smelled "like perfume."
At 15, without any formal education, Honda left home and headed to Tokyo to look for work. He obtained an apprenticeship at a garage in 1922. After some hesitation over his employment, he stayed for six years, working as a car mechanic before returning home to start his own auto repair business in 1928 at age 22.
Honda's mechanical brilliance was matched by competitive fire. He raced a turbocharged Ford in the "1st Japan Automobile Race" at Tamagawa Speedway in 1936. He crashed and seriously injured his left eye. His brother was also injured. After that, he quit racing. But the racing spirit never left him—it simply found new outlets.
In 1937, with financing from his acquaintance Kato ShichirĹŤ, Honda founded TĹŤkai Seiki to make piston rings working out of the Art Shokai garage. After initial failures, TĹŤkai Seiki won a contract to supply piston rings to Toyota, but lost the contract due to the poor quality of their products. After attending engineering school without graduating, and visiting factories around Japan to better understand Toyota's quality control processes known as "five whys", by 1941 Honda was able to mass-produce piston rings acceptable to Toyota.
This pattern—initial failure, obsessive learning, eventual mastery—would become the Honda template. During World War II, Tōkai Seiki grew to 2,000 employees supplying parts to Toyota and Nakajima Aircraft. But war would destroy what Honda had built.
A US B-29 bomber attack destroyed TĹŤkai Seiki's Yamashita plant in 1944, and the Iwata plant collapsed on January 13 during the 1945 Mikawa earthquake. Soichiro Honda sold the salvageable remains of the company to Toyota after the war for ÂĄ450,000 and used the proceeds to found the Honda Technical Research Institute in October 1946.
At 40 years old, Honda was starting over from nothing—and about to build something far greater.
Investment Insight: Soichiro Honda's biography reveals the cultural DNA that still defines the company: an engineering-first mentality, willingness to fail and learn, and deep suspicion of bureaucracy. Unlike Toyota's hierarchical kaizen culture or Nissan's partnership-dependent model, Honda was built from day one on individual initiative and competitive spirit. This explains both the company's historic innovation capacity and its cultural difficulty with certain strategic partnerships.
III. Post-War Birth: Motorcycles and The Fujisawa Partnership
In the rubble of post-war Japan, gasoline was rationed and cars were a distant luxury. But people still needed to move. Soichiro Honda saw opportunity in desperation.
With a staff of 12 men working in a 16 square meter shack, they built and sold improvised motorized bicycles, using a supply of 500 two-stroke 50 cc Tohatsu war surplus radio generator engines. When the engines ran out, Honda began building their own copy of the Tohatsu engine, and supplying these to customers to attach to their bicycles. This was the Honda A-Type, nicknamed the "Bata Bata" for the sound the engine made.
The tiny motors produced just one horsepower, but they represented something profound: mobility for the masses at a moment when Japan desperately needed it. Post-war Japan needed to get mobile—quickly and cheaply. Soichiro hit upon the idea to retro-fit surplus generator motors to bicycles. In doing so he created the first "Honda." His challenge was now to meet the demand for them.
Yet Honda's genius for engineering was not matched by business acumen. He was impulsive, sometimes tyrannical with employees, and possessed no talent for managing money. In his memoirs, Soichiro Honda expressed his sorrow for sometimes being rude to his employees, humiliating and occasionally even slapping them in the face. What he needed was a partner.
Mr. Soichiro Honda and Mr. Takeo Fujisawa, two men with vastly different backgrounds and personalities, met for the first time one sultry summer day in August 1949, a year after the founding of Honda.
Fujisawa was Honda's opposite in almost every way: cultured where Honda was rough, financially astute where Honda was indifferent to money, strategically patient where Honda was impetuous. Honda pioneered new engine designs and components while his partner, Fujisawa Takeo, oversaw the company's finances and marketing operations.
This division of labor—Honda as chief engineer, Fujisawa as chief executive—created a template for innovation that few companies have replicated. Honda could obsess over engine tolerances and racing performance while Fujisawa built dealer networks, managed cash flow, and planned market expansion. Neither stepped into the other's domain.
Honda Motor Co., Ltd. was established with co-founders Soichiro Honda and Takeo Fujisawa and introduced (in 1949) its first original designed and engineered product which Mr. Honda appropriately named the "Dream" D-type motorcycle.
The name "Dream" was deliberate and revealing. Honda genuinely believed that machines could transform lives, that mobility was a form of human liberation. This wasn't marketing—it was philosophy.
By 1959 Honda's company had become the leading maker of motorcycles in the world. In just a decade, a tiny Japanese startup had overtaken British giants like Triumph and BSA, and was about to set its sights on the American market.
The partnership would endure for 25 years. Honda and Takeo Fujisawa made a pact never to force their own sons to join the company. They wanted Honda Motor to remain a meritocracy, not a family dynasty—another deliberate break from Japanese corporate tradition.
IV. The Super Cub: The Most Successful Vehicle in History
In the autumn of 1956, two middle-aged Japanese businessmen wandered through the streets of Germany, observing how Europeans moved through their cities. The idea for a new 50-cubic-centimetre motorcycle was conceived in 1956 when Honda Motor's Soichiro Honda and Takeo Fujisawa toured Germany and witnessed the popularity of mopeds and lightweight motorcycles.
What they saw sparked an idea that would produce the most commercially successful motor vehicle in human history.
Fujisawa had a specific customer in mind: Japanese soba noodle delivery men, who needed to carry trays of steaming noodles while navigating crowded streets. The vehicle he envisioned would need to be operated with one hand. He reportedly told Honda: "If you can design a small motorcycle, say 50 cc with a cover to hide the engine and hoses and wires inside, I can sell it."
The engineering challenge was formidable. The first production Super Cub 50 featured a step-through frame, a 50cc single-cylinder engine that revved to 9,500 rpm, a three-speed semi-automatic gearbox with a centrifugal clutch, and a plastic fairing to protect the rider from wind and dirt. Honda insisted on a four-stroke engine when cheaper two-strokes dominated the market—a decision that delivered better fuel economy and reliability but required more sophisticated engineering.
"The requirements of this four-horsepower engine were simply unheard of," said Jozaburo Kimura, one of the lead industrial designers. "The 50cc 2-stroke Cub F auxiliary engine that we'd been producing till then only put out 1 horsepower. It followed that we'd have to boost power output by 4 times all at one go."
Even the spark plugs had to be invented from scratch. A smaller 10mm spark plug would be needed to make room for larger valves, but such a spark plug didn't exist. Honda worked with NGK to develop this smaller plug. In the end, the 50cc four-stroke made 4.5 horsepower at 9,500 rpm, with fuel economy far better than any two-stroke.
To manufacture the new motorcycle, Honda made what observers considered a reckless bet. The company built a massive new factory in Suzuka, modeled on the Volkswagen Beetle production line in Wolfsburg, Germany. The facility was designed to produce 30,000 Super Cubs per month—at a time when Honda's best-selling models moved only 2,000 to 3,000 units monthly.
Sales reached 24,000 units only five months from the day of its release, a figure that quickly rose to nearly 167,000 Super Cubs in its second year, accounting for roughly 60% of Japan's total motorcycle sales. In its third year, production skyrocketed to approximately 560,000 units as the Super Cub continued to exhibit an astounding level of popularity.
It was a hit in Japan right out of the gate; By its second year, the Super Cub accounted for 60 percent of all domestic motorcycle sales.
Then Fujisawa turned his attention to America—despite his own market research showing annual U.S. motorcycle sales of just 60,000 units. In American society at the time, motorcycle riders were widely regarded as outlaws wearing black leather jackets. In other words, motorcycles didn't have a very good reputation as modes of transport, which was why so few were sold per year.
To establish the new business, Honda sought $1 million in capital funds. The request was denied—not by Honda management, but by Japan's Ministry of Finance, which then controlled the flow of currency out of Japan. The Japanese government had such little confidence in the venture that it approved capital of just $250,000—and on the condition that only half of that money be taken out of the country in cash.
The Super Cub's US advertising campaign, "You meet the nicest people on a Honda," had a lasting impact on Honda's image and on American attitudes to motorcycling, and is often used as a marketing case study. The brilliant campaign, created by Grey Advertising, featured wholesome images of students, housewives, and young professionals on Honda motorcycles—directly challenging the outlaw biker stereotype.
The numbers tell the story of the greatest vehicle success ever recorded: In continuous manufacture since 1958 with production surpassing 60 million in 2008, 87 million in 2014, and 100 million in 2017, the Super Cub is the most produced motor vehicle in history.
With more than 100 million sold, these world-famous two-wheelers have outsold the Beetle, Corolla, and F-150 combined.
Many have suggested that the Honda Super Cub was the vehicle that first established the reputation for affordability and reliability that Japanese cars would later enjoy.
Market Context: The Super Cub's success provided Honda with the financial foundation and manufacturing expertise to enter the automobile market. More importantly, it established the Honda brand globally as synonymous with reliability, affordability, and clever engineering—brand equity that remains valuable six decades later.
V. Defying MITI: The Bold Entry into Automobiles
In 1961, Japan's Ministry of International Trade and Industry—the powerful bureaucracy that had orchestrated much of Japan's post-war economic miracle—decided the country had too many automakers. MITI, in May 1961, issued a basic administrative policy regarding the automotive industry. The new MITI policy identified the automobile industry as relatively less competitive in the global market, and in preparation for the deregulation of automobile imports by the spring of 1963, divided automobile manufacturers into three groups. Specific measures included the consolidation of automobile manufacturers and restrictions on new market entrants. If this bill was passed, Honda, which had no experience in automobiles, would not be able to enter the market.
For Soichiro Honda, who had dreamed of building cars since chasing that Model T as a child, the proposed law was an existential threat. His response was characteristically defiant.
"I had the right to manufacture automobiles, and they couldn't enforce a law that would allow only the existing manufacturers to build them while preventing us from doing the same," Honda told MITI officials. "We were free to do exactly what we wanted. Besides, no one could say for certain that those in power would remain there forever. Look at history. Eventually, a new power would always arise. I shouted at him angrily, saying that if MITI wanted us to merge (form a joint venture with another company), then they should buy our shares and propose it at our shareholders' meeting. After all, we were a public company. The government couldn't tell me what to do."
The nonconformist Honda eschewed conventional Japanese managerial traditions by promoting "the Honda Way," which relied on personal initiative coupled with a close relationship between workers and management. He also flouted the Japanese government's attempt to limit the nation's auto industry to a few dominant firms.
Rather than wait for MITI's permission, Honda accelerated development. In 1962, the company unveiled the T360 mini-truck and S360 sports car at the Tokyo Motor Show. In January 1962, the year following the MITI announcement, both Mr. Honda and Mr. Fujisawa attended a New Year's press conference and formally announced the entry of Honda into the automobile industry.
The T360, Honda's first production automobile, launched in August 1963. It was followed by the S500 sports car. His company began producing automobiles in 1963 and had become the third largest Japanese automaker by the early 1980s.
By the way, as for the basic automotive administrative policy which had prompted Honda to embark on the automobile development, it did not pass in the end and was eventually scrapped. For Honda, however, this challenge was never a meaningless one. Not only did it result in the venture into the automobile market, but development technologies and the "red car" were also bequeathed as significant assets.
Racing, as always, played a central role in Honda's automotive ambitions. Only one year after becoming a car manufacturer, Honda took the audacious step of entering the motor racing arena. The decision to make our own chassis and engine was soon rewarded, and in 1965, in Mexico, Richie Ginther took us to our maiden victory.
The N360 city car, with its sweet-revving air-cooled engine, began Honda's passenger car success story. But the path to genuine automobile success would require surviving near-disaster first.
VI. The Civic and CVCC: Turning Crisis into Opportunity
By the early 1970s, Honda's automobile venture was teetering on the edge of failure. The company's initial models had struggled in key markets, particularly the United States.
The Honda Civic went on sale in Japan on July 12, 1973. It was a car developed with the company's back to the wall, at a time when the company considered withdrawing from the car business if the plan failed.
The Civic represented Honda's last chance—and it arrived at precisely the right moment in history.
Two crises converged to create Honda's opportunity. First, the U.S. Clean Air Act of 1970 (the Muskie Act) mandated dramatic reductions in vehicle emissions by 1975, requirements that the American Big Three declared impossible to meet. Second, the 1973 OPEC oil embargo sent gasoline prices soaring and created massive demand for fuel-efficient vehicles.
Honda's response to the emissions challenge was characteristically unconventional. Rather than developing catalytic converters like other manufacturers, Honda engineers pursued a completely different approach. CVCC, or Compound Vortex Controlled Combustion, is an internal combustion engine technology developed and trademarked by Honda. The engine innovatively used a secondary, smaller auxiliary inlet valve to feed a richer air-fuel mixture to the combustion chamber around the spark plug, while the standard inlet valve fed a leaner air-fuel mixture to the remainder of the chamber, creating a more efficient and complete combustion.
Honda's CVCC motor was the first engine certified by the EPA to meet the toughest 1975 emissions regulations without relying on a catalytic converter.
In fact, in December of 1972, the CVCC was the first ever engine to pass the upcoming 1975 emissions standards set forth by the Environmental Protection Agency. Funnily enough, Honda didn't even have a car to house the engine.
The achievement was so remarkable that EPA officials asked if Honda could supply engines to other manufacturers. At a 1973 hearing, at the EPA hearing, Honda was asked, 'Can Honda really produce cars that meet the 1975 requirements? And if so, can Honda supply CVCC engines to automakers such as GM?' But honestly, we had our hands full just taking care of Honda's business. We didn't have the capacity to supply products to a company the size of GM. It was a very frustrating experience.
When GM's chairman dismissed the CVCC technology as suitable only for "some little toy engine," Soichiro Honda responded with engineering audacity. Honda purchased a 1973 Chevrolet Impala, complete with a 350 cubic inch (5.7L) V8 engine, and had it shipped to Japan. There, Honda's engineers retrofitted the engine with their CVCC system, replacing the heads, intake manifold, and carburetors. It was then flown back to the United States to the EPA's testing facility in Ann Arbor, Michigan. It worked. The system Gerstenberg had derided as only suitable for "some little toy" engine allowed the big, thirsty V8 to pass the new EPA emissions requirements without a catalytic converter. Horsepower remained at 160 HP, and some tests even showed a slight fuel economy improvement.
The Civic CVCC kept improving its fuel economy rating with each passing year, and was rated by the EPA as the most fuel efficient vehicle in the U.S. for four consecutive years through the 1978 model. In 2000, SAE's monthly magazine, Automotive Engineering, named the Honda Civic the Best Engineered Car of the 1970s.
Honda was the ONLY company in Japan to record a major increase in sales. Production on their side shot up to 430,000 cars that year and sales rose 21 percent compared to the previous year. Demand for the Civic was so strong that Honda actually discontinued production of their kei cars in order to build more of them.
43,000 CVCC-powered Civics were sold in the United States in 1974. Sales for the brand swelled to 102,000 in 1975, making them the fourth-largest foreign automaker in the country behind Volkswagen, Toyota, and Nissan.
The compact, front-wheel drive Civic was a car perfect for the 1970s. 10 generations and 24 million sales later, it remains as relevant and popular as ever.
Strategic Significance: The CVCC story encapsulates Honda's distinctive competitive approach: when faced with industry-wide challenges, look for solutions others aren't pursuing, leverage racing-derived engineering capabilities, and turn regulatory constraints into competitive advantages. This pattern would repeat throughout the company's history.
VII. U.S. Manufacturing: The Ohio Gamble
On October 11, 1977, Honda executives gathered with Ohio Governor Jim Rhodes to announce something unprecedented: Honda leadership joined with Ohio Governor Jim Rhodes and state leaders to announce plans for Honda's first U.S. manufacturing facility, a motorcycle plant in Marysville, Ohio.
Honda signed an agreement with the State of Ohio in October 1977, simultaneously announcing in Japan and the U.S. that it planned to build a motorcycle plant. The total amount of investment was to be $25 million, which was then equal to approximately 6.5 billion yen. The agreement entailed the acquisition of 214 acres of land for the construction of a facility capable of producing 60,000 large motorcycles a year. It was also announced that when motorcycle production was well underway, Honda intended to manufacture automobiles in a facility adjacent to the motorcycle plant.
The assembly plant opened in 1979 as American Honda Motor Company's first production facility in the United States.
Another watershed event in the Honda Motor Company's history was the establishment of a factory in 1978 to produce motorcycles in the United States. This move was followed four years later, in 1982, by the opening of an automobile assembly line in Marysville, Ohio. Despite many studies that warned that such a move, using American labor, would not be profitable, the venture proved to be a shrewd investment for Honda and a boon for the Ohio economy. Business analysts give the Ohio operation special credit for the way in which it managed to involve workers in the affairs of the company, a legacy of the Honda style. By the mid-1980's, more than one-quarter of the Honda automobiles sold in the United States were being produced in the Marysville facility. Before long, the other two big Japanese auto manufacturers, Toyota and Nissan, followed Honda's example by building their own plants in the United States.
The first Japanese auto plant to build a car in America turns 25, marking a milestone that brought innovation to the U.S. auto industry and vaulted Honda to a leadership position.
On November 1, 1982, Honda associates who were building cars in small numbers with nearly identical content and in only a few colors also had little manufacturing experience. In the last two months of 1982, fewer than 1,000 Accords were produced as the associates focused on mastering their car-building skills. By the end of 1982, they were making 160 cars per day. The Accord was a much simpler product then, said Tim Hines, who was among the first associates at the auto plant. "While getting ready for mass production, we were producing maybe six cars per day, really focusing on assuring quality on every part of the vehicles. Those were perfect cars, because we were learning to build quality first, and then the product."
The decision to manufacture in America pre-dated the "voluntary export restraints" that would later limit Japanese auto imports. Honda's move was strategic, not defensive—driven by Fujisawa's long-held belief that Honda should build where it sells.
Associates at the Honda Marysville Auto Plant (MAP) in Ohio today marked the production of the 15 millionth vehicle in the more than 40-year history of the plant, Honda's first auto manufacturing facility in North America.
Honda began building automobiles in America 40 years ago, in November 1982, at the Marysville Auto Plant. Today, Honda has invested more than $14.2 billion in Ohio and employs more than 14,400 Ohio associates.
Honda was the first Japanese automobile manufacturer to release a dedicated luxury brand, Acura, in March 1986. Acura's launch created a template that Toyota (Lexus) and Nissan (Infiniti) would later follow.
Manufacturing Principle: Honda's early U.S. localization created structural advantages that persist today. With extensive manufacturing capacity in Ohio, Alabama, and Indiana, Honda faces lower tariff exposure than competitors more dependent on imports. This matters increasingly in an era of rising trade tensions and supply chain nationalism.
VIII. Succession and The 1990s Crisis
October 1973 marked one of the most unusual transitions in Japanese corporate history. In October 1973, coinciding with Honda's 25th anniversary and the promising signs that came with the Civic, the two founding partners, Soichiro Honda and Takeo Fujisawa, retired at the same time.
A longtime associate, Kiyoshi Kawashima, hired by Honda as an engineer in 1947, became president of the Honda Motor Company. Honda continued to take a role in company affairs with the title of "supreme adviser." The early retirement of Honda and Fujisawa (Honda was only sixty-six years old, and Fujisawa was four years younger) was a striking exception to customary Japanese practice in which senior executives are often in their seventies or even eighties before stepping down. Honda explained the decision by saying that it was necessary to allow younger leaders the opportunity to explore new ideas and strategies unhampered by the tendency to defer constantly to the cofounders.
Soichiro Honda died on 5 August 1991, days before the Hungarian Grand Prix, of liver failure. He was 84. Ayrton Senna, winner of the Grand Prix, dedicated the victory to Honda.
The loss of the founder exposed vulnerabilities in Honda's strategy. Following the death of Soichiro Honda and the departure of Irimajiri, Honda found itself quickly being outpaced in product development by other Japanese automakers and was caught off-guard by the truck and sport utility vehicle boom of the 1990s, all which took a toll on the profitability of the company. Japanese media reported in 1992 and 1993 that Honda was at serious risk of an unwanted and hostile takeover by Mitsubishi Motors, which at the time was a larger automaker by volume and was flush with profits from its successful Pajero and Diamante models. Kawamoto acted quickly to change Honda's corporate culture, rushing through market-driven product development that resulted in recreational vehicles such as the first-generation Odyssey and the CR-V.
Nobuhiko Kawamoto, who became president in 1990, implemented rapid changes. The CR-V, launched in 1995, became Honda's entry into the fast-growing compact SUV segment. The Odyssey minivan captured family buyers. These "Creative Mover" models rescued Honda from potential crisis.
Honda became the second-largest Japanese automobile manufacturer in 2001.
IX. Racing and Brand DNA: The McLaren-Honda Era
Few partnerships in motorsport history have been as dominant—or as emotionally resonant—as McLaren-Honda with Ayrton Senna.
The next big move came with an engine partnership with McLaren, which led to F1 domination, with teammates Alain Prost and Ayrton Senna winning an astonishing 15 out of 16 races in 1988.
The McLaren Honda F1 team, the highly successful partnership between McLaren and Honda, won an incredible 44 of the 80 races they contested between 1988 and 1992, a dominating force in F1 history. Ayrton Senna became World Champion in 1988, 1990 and 1991 all with this team.
The statistics surrounding the marriage between the Brazilian driver, the British team and the Japanese engine manufacturer are really impressive: 80 GPs, 30 wins, 45 pole positions, 48 podium finishes and three world titles in 5 seasons total.
Ayrton Senna, the late F1 driver, once remarked that Honda played a pivotal role in his three world championships. He held deep respect for the company's founder, Soichiro Honda, and maintained a strong relationship with Nobuhiko Kawamoto, the chairman of Honda at the time. Senna even referred to Honda as "the greatest company in the world."
Nobuhiko Kawamoto, who was in charge of the second era of Honda's F1 project and later became the fourth president of Honda, recalled of Senna: "Staff who were at the F1 scene said Ayrton was really special. Drivers at that time were not generally interested in engine data graphs, but he wanted us to show them to him, to explain them to him, and he worked hard to understand the data. He is very intelligent. Then he would have in-depth discussions with our engineers, as an equal. Drivers usually say, 'This engine is no good,' but Ayrton would enthusiastically point out which areas could be improved. Engine development accelerated, Ayrton won, and our engineers were happy because of the results."
Senna's death at Imola in 1994, two years after Honda withdrew from F1, marked the end of an era. Upon learning of the tragedy, Honda displayed a McLaren MP4/6 and Honda RA121E in the ground floor of the Welcome Plaza Aoyama within Honda's Aoyama building, as a memorial to Senna. The red and white McLaren Honda was completely covered in bouquets laid by fans.
Honda would return to F1 multiple times—including a troubled 2015-2017 partnership with McLaren and a more successful partnership with Red Bull that delivered Max Verstappen's first world championship in 2021.
X. Diversification: Jets, Robots, and the Honda Way
The HondaJet represents perhaps the purest expression of Honda's founding philosophy: if conventional wisdom says something can't be done, that's exactly what Honda should attempt.
In October 2000, Honda R&D Americas established a research facility at the Piedmont Triad International Airport in Greensboro, North Carolina. On December 3, 2003, a proof-of-concept HondaJet conducted its first successful test flight at the Greensboro facility. At this point, Honda executives remained unsure about whether or not to commercialize the HondaJet program. To better understand the commercial potential of the HondaJet, Fujino publicly displayed it for the first time on July 28, 2005, at the annual EAA AirVenture Oshkosh airshow. The debut attracted strong interest, and convinced Honda executives to commercialize the HondaJet.
The HondaJet's distinctive over-the-wing engine mounting—placing turbofan engines above rather than below or at the rear of the fuselage—defied conventional aircraft design. HondaJet's most outstanding feature is the placement of engines over the wings, a complete departure from conventional wisdom. By moving the engines over the wings, not only is the interior more comfortable and spacious, but aerodynamic drag is suppressed, and higher speed and fuel economy is achieved.
The HondaJet was awarded a provisional type certificate by the FAA in March 2015. The aircraft received its FAA type certificate in December 2015, and received its European Aviation Safety Agency (EASA) type certificate in May 2016.
In 2021, the HondaJet was the most delivered aircraft in its class for the fifth consecutive year, based on data provided by the General Aviation Manufacturers Association (GAMA). During 2021, Honda Aircraft Company delivered 37 aircraft to customers globally.
"The 250th delivery milestone is not just a number, but a narrative of our constant pursuit of excellence and innovation," said Honda Aircraft Company President & CEO Hideto Yamasaki. The HondaJet global fleet has surpassed 210,000 flight hours with an exceptional dispatch reliability of 99.7%.
In robotics, Honda pursued an even more ambitious goal. Honda's basic research and development in humanoid robotics began in 1986 with the goal of developing an autonomous walking robot that could be helpful to individuals as well as of practical use in society.
ASIMO (Advanced Step in Innovative Mobility) is a humanoid robot created by Honda in 2000. In 2002, 20 units of the first ASIMO model were produced; three different ASIMO models subsequently followed. As of February 2009, there were over 100 ASIMO units in existence. In July of 2018, Honda stated that it would be ceasing all development and production of ASIMO robots in order to focus on more practical applications using the technology developed through ASIMO's lifespan. It made its last active appearance in March 2022, as Honda announced the retirement of ASIMO.
The total number of steps taken by all units of ASIMO amounted to more than 33.26 million steps and the total walking distance reached 7,907 km (4,913 miles).
Though ASIMO never achieved commercial deployment, the robotics research produced technology that Honda now applies to walking-assist devices, exoskeletons, and autonomous vehicle development.
XI. The China Challenge and Market Share Erosion
China was once Honda's golden market—a country where Japanese automakers dominated with their reputations for quality and reliability. That era has ended with brutal speed.
Honda Motor's sales in China were down 30.9% last year to 852,269 units, falling below 1 million for the first time in nine years as Japanese automakers continue to struggle from price competition with BYD and other local makers.
The company's sales in China fell by 30.9% in 2024, dropping to 852,269 units—the first time in nearly a decade that Honda's sales in the country have fallen below one million.
The challenge comes from a fundamental shift in what Chinese consumers value. China's new energy vehicle (NEV) market—which includes battery electric vehicles (BEVs), plug-in hybrids (PHEVs), and fuel cell vehicles (FCEVs)—now accounts for 40% of all new car sales, with BYD dominating the segment. In 2024, BYD sold 3.83 million passenger cars in China, 8.5 times its 2019 sales.
Due to strong demand for electrified vehicles, Honda will close a manufacturing line at the Dongfeng Honda Engine factory at the end of this month. This move will halve the annual production capacity of its joint venture, reducing it from 520,000 units to around 260,000. In January, it ended production at a joint venture plant with Guangzhou Automobile Group that had an annual capacity of 240,000 vehicles. These changes will lower Honda's local production capacity from 1.49 million as of early 2024 to just 960,000 units.
The market share of foreign brands has diminished significantly, now less than half of what it was in 2020. Among these, only Toyota has bucked the trend, recording a 9.3% increase so far in 2025, whereas Honda has seen a steep decline of 35.5% since last year.
In China itself, the world's largest car market, Japanese automakers are fighting for survival as local competitors flood showrooms with wave after wave of electric vehicles. The same Chinese companies are pushing into Southeast Asia, rapidly gaining ground in what has long been a stronghold for legacy brands like Toyota, Honda and Mitsubishi. Japanese automakers suffered the biggest market share losses of any carmakers between 2019 and 2024 in China, Singapore, Thailand, Malaysia and Indonesia.
China Reality Check: Honda's China struggles reflect a structural, not cyclical, challenge. Chinese EV makers like BYD offer compelling products at prices legacy automakers struggle to match. More concerning, Chinese consumers increasingly prefer domestic brands' software and connectivity features. Honda's traditional advantages—reliability, fuel efficiency—carry less weight in markets prioritizing advanced technology and lower prices.
XII. EV Transformation and Strategic Repositioning
Honda has staked its future on an aggressive electrification strategy—though recent market realities have forced adjustments.
Honda has not changed its belief that EVs are the most effective solution in the area of small mobility products such as motorcycles and automobiles, and Honda's electrification target to make EVs and FCEVs represent 100% of its global vehicle sales by 2040 remains unchanged.
Honda is planning to invest approximately 10 trillion yen in resources over the 10-year period through FY2031, when the period of full-fledged popularization of EVs is expected to start.
The plans include a massive investment of 10 trillion yen (about $64 billion). The company will use the funds to develop an electric vehicle value chain with a focus on reducing the cost of batteries by 20% and overall vehicle production costs by 35% over the next decade. Honda also reiterated its plans for EVs and fuel cell vehicles to account for 40% of its global auto sales, and to produce more than 2 million of them by 2030. The automaker's future "Honda 0 Series" vehicles will be positioned as its flagship electric models, and it plans to launch seven new EVs under the new sub-brand by 2030.
However, Honda announced it will cut back on EV investment, citing slowing demand. Whereas before it predicted EVs would account for 30 percent of sales by 2030, now it projects those figures to be 20 percent instead. It has reduced its planned electrification and software spend by 30 percent accordingly, and will prioritize hybrid models as an alternative.
As a result, Honda plans to reduce its EV-related investment from $69 billion to $48 billion, while placing a heavier focus on hybrid models.
A critical component of Honda's EV strategy is the massive battery plant being constructed in partnership with LG Energy Solution in Ohio. The two companies have committed to invest $3.5 billion in the new joint venture (JV) facility, with their overall investment projected to reach $4.4 billion. The facility is scheduled to be completed by the end of 2024, with plans to create 2,200 jobs, and the aim for approximately 40GWh of annual production capacity.
In October 2022, Honda announced a $700 million investment in Ohio auto operations to create the Ohio EV Hub, which includes the Marysville Auto Plant, the East Liberty Auto Plant, Anna Engine Plant, and the company's new joint venture battery plant. "The Marysville Auto Plant is ready to lead Honda's transformation into BEV production," said Mike Zindars, MAP Plant Lead. "Being selected as the first Honda plant in North America to build a Honda electric vehicle is a testament to the capability of our associates."
XIII. The Honda-Nissan Drama: Merger Talks and Collapse
The announcement in December 2024 stunned the automotive world: Honda and Nissan, two of Japan's proudest automotive names, were exploring a merger that would create the world's third-largest automaker.
Japanese automakers Nissan and Honda announced they had entered into official talks to merge and create the world's third-largest automaker by sales. In a news conference, Honda CEO Toshihiro Mibe said the companies needed greater scale to compete in the development of new technologies in electric vehicles and intelligent driving. A business integration would give the companies an "edge that will not be possible under the current collaboration framework," Mibe said. The deal would aim to share intelligence and resources and deliver economies of scale and synergies while protecting both brands.
Honda reported 1.382 trillion yen in operating profit for the full year to March 2024, versus Nissan's 568.7 billion yen. The companies would have had a combined value of nearly $54 billion, with Honda's market capitalization contributing the greater $43 billion share.
The rationale was clear. The companies are grappling with intense global competition in the EV market from the likes of Tesla and China's BYD. The high cost of the EV transition for legacy companies has long been expected to drive industry consolidation. Japan's Toyota is the world's biggest automaker by sales, followed by Germany's Volkswagen.
But from the start, tensions simmered. Honda viewed Nissan's announcement to cut 9,000 jobs worldwide and reduce production capacity by 20% in November 2024 as insufficient. Honda executives found Nissan's decision-making process too slow, fuelling their push for a more dominant role in the proposed merger. In a joint statement, both companies confirmed Honda's proposal to transition the merger into a parent-subsidiary structure, with Honda taking control through a share exchange. This ultimately led to the termination of discussions.
On February 13, 2025, the companies officially ended talks, partly because Nissan was against becoming a Honda subsidiary.
Honda and Nissan clarified the end of merger talks does not mean the two companies will cease to collaborate. "Going forward, the Companies will collaborate within the framework of a strategic partnership aimed at the era of intelligence and electrified vehicles." Honda CEO Toshihiro Mibe said a relationship of collaboration is more likely the future between Honda and Nissan but reopening merger talks was not, as "both sides were not able to find common ground and reach an agreement."
"We are talking about how we can collaborate in the U.S. Is there any opportunity for joint product development or for powertrain development? These are the topics that we are discussing," Nissan President and CEO Ivan Espinosa said. The two companies signed a memorandum of understanding in August 2024 to conduct joint research on software-defined vehicles, batteries and electric motors.
The collapse leaves both companies facing the EV transition alone—a daunting prospect given the scale advantages enjoyed by Tesla, BYD, and Volkswagen.
XIV. Bull and Bear Cases
The Bull Case: Engineering Heritage Meets Electrification
Honda's competitive advantages remain formidable. The company possesses genuine engineering differentiation—the HondaJet's over-wing engine design, the original CVCC technology, decades of racing innovation—that competitors cannot easily replicate. This "engineering-first" DNA could translate into distinctive EV products as the market matures beyond simple battery capacity metrics.
The Ohio EV Hub represents a potentially powerful competitive moat. With vertically integrated battery production, vehicle assembly, and long-established supplier relationships, Honda can capture value chain economics while mitigating tariff and supply chain risks that plague competitors dependent on Asian imports.
Honda's hybrid expertise provides a crucial bridge. While pure EV demand has softened in key markets, hybrid sales remain strong. Honda's efficient two-motor hybrid system is among the best in the industry, and the company plans to expand hybrid offerings even as it develops EVs.
The motorcycle business—often overlooked—generates substantial profits and cash flow. In motorcycle business operations, due to an increase mainly in Asia, sales totaled 10 million 382 thousand units. This diversification provides stability through automotive transitions.
The Bear Case: Structural Challenges Multiply
China's collapse threatens Honda's global profitability. The company has been forced to cut capacity by more than 35%—and there's no clear path to recovery as Chinese consumers increasingly prefer domestic brands. Southeast Asia, once a Japanese stronghold, is following a similar trajectory.
The EV transition timing risk cuts both ways. Honda's decision to reduce EV investment and prioritize hybrids could prove prudent if EV adoption slows further—or disastrous if competitors like BYD accelerate their global expansion. The company has limited margin for error.
The failed Nissan merger exposed Honda's scale disadvantage. With roughly 4 million annual vehicle sales, Honda lacks the volumes of Toyota (10+ million), Volkswagen (9+ million), or even the combined Chinese champions. R&D costs for EVs, autonomous driving, and software don't scale down proportionally.
Porter's Five Forces Analysis:
Supplier Power: Moderate and rising. Battery materials and semiconductors represent critical chokepoints. Honda's LG partnership addresses battery supply, but the company remains exposed to raw material volatility.
Buyer Power: High and increasing. Consumer choice expands as EV options multiply. Brand loyalty erodes as Chinese competitors offer comparable quality at lower prices.
Threat of Substitutes: High. Transportation-as-a-service, improved public transit in Asia, and remote work all threaten vehicle ownership volumes.
Threat of New Entrants: High. Tesla demonstrated that traditional barriers (manufacturing expertise, dealer networks, brand heritage) provide limited protection. Chinese EV makers and tech companies represent credible entrants.
Competitive Rivalry: Intense and intensifying. The EV transition has created existential competitive dynamics where market share losses compound quickly.
Hamilton Helmer's 7 Powers Framework:
Scale Economies: Limited. Honda lacks Toyota's or VW's manufacturing scale, creating cost disadvantages in platform development.
Network Effects: None significant. Unlike Tesla's Supercharger network (before third-party access), Honda has no network-based competitive advantages.
Counter-Positioning: Potentially developing. Honda's hybrid-heavy strategy counter-positions against pure-EV competitors if market timing favors hybrids.
Switching Costs: Low. Consumers face minimal switching costs between automotive brands.
Branding: Moderate. Honda's reliability reputation remains valuable but has degraded versus historical peak.
Cornered Resource: Limited. Honda's engineering talent is excellent but not irreplaceable.
Process Power: Moderate. Honda's manufacturing and engineering processes are strong, though Japanese lean production is now industry standard rather than differentiating.
XV. Key Performance Indicators for Investors
KPI #1: China Sales Volume and Market Share
Honda's China performance serves as a leading indicator of the company's competitiveness in the EV era. Current trajectory shows accelerating decline—down 35%+ year-to-date in 2025. Stabilization or improvement would signal successful electrification; continued deterioration suggests structural competitive disadvantage.
KPI #2: U.S. EV Mix and Prologue/0 Series Sales
As Honda's most profitable market, U.S. EV adoption rates within Honda's portfolio will determine whether the company can maintain margins through the transition. The 2024 Prologue crossover (using GM's Ultium platform) and the 2026 Honda 0 Series (Honda's proprietary EV architecture) represent critical proof points. Watch quarterly EV sales as a percentage of total U.S. volume.
KPI #3: Consolidated Operating Margin
Honda's consolidated sales revenue for the fiscal year ended March 31, 2024 increased by 20.8%, to JPY 20,428.8 billion. Operating profit increased by 77.0%, to JPY 1,381.9 billion from the previous fiscal year. Operating margin is the critical indicator of Honda's ability to fund the EV transition while maintaining returns. The target of 7%+ operating margin requires continuous cost reduction as EV scale ramps.
XVI. Conclusion: Dreams and Realities
In August 1949, when Soichiro Honda and Takeo Fujisawa met for the first time, post-war Japan offered little reason for optimism. Infrastructure lay in ruins. Capital was scarce. The American and European automotive industries seemed insurmountably advanced.
Yet within a single generation, two men working out of a shack had created a global mobility company that would define Japanese manufacturing excellence. His status was such that People magazine placed him on their "25 Most Intriguing People of the Year" list for 1980, dubbing him "the Japanese Henry Ford."
That heritage now faces its greatest test since the company's founding. The electric vehicle transition, Chinese competitive disruption, and market share erosion in once-dominant markets create existential challenges. Honda's response—massive electrification investment, U.S. battery manufacturing, hybrid bridge strategy—represents a coherent if uncertain path forward.
The company's distinctive culture—engineering-driven, racing-proven, resistant to conventional wisdom—remains its most valuable asset. Soichiro Honda once said, "We have consistently chosen a most difficult path filled with hardships. We must possess the will to challenge difficulties and the wisdom to create new values without being bound by established standards. We do not wish to imitate others."
That philosophy created the Super Cub, the CVCC engine, and the HondaJet. Whether it can create an electric future worthy of the Honda name remains the central question facing the company's next generation of dreamers.
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