Sony and Honda prepare for tough US EV debut under Trump

Sony Group and Honda Motor are preparing to take orders for their first electric vehicle, two and half years after the two Japan icons first joined hands for the project.

Sony Honda Mobility (SHM) will showcase a prototype “equivalent” of its fully electric sedan, the Afeela, at the CES 2025 consumer tech show in Las Vegas, Nevada, next month, according to Izumi Kawanishi, president and chief operating officer of SHM.

“The hardware, or car body, is pretty much complete. We’ll be working on the software until the last minute,” Kawanishi told Nikkei Asia in a recent interview. The company will make the cars at Honda’s US plant and deliver them from 2026, starting with the US market and then Japan.

The focus on software is one reason market observers are so keenly watching Afeela’s debut. At stake is whether the company’s software-driven approach can succeed in the fast-changing EV landscape that legacy Japanese automakers have struggled to keep up with.

But the novice EV maker will be entering the already competitive US market at “the worst timing,” according to Takaki Nakanishi, chief analyst of Tokyo-based automotive consultancy the Nakanishi Research Institute.

President-elect Donald Trump is expected to cut subsidies for EVs after he takes office in January. Canceling the current credits could cause EV sales to drop nearly 30%, according to an October working paper published by the National Bureau of Economic Research, a US-based nonprofit. Automakers are also bracing for the impact from Trump’s promised tariff hikes, which could boost operating costs.

“All businesses have ups and downs, so we won’t live and die by it,” Kawanishi said of the uncertainties in the US market. “If we think about the environment, EVs will spread, and sooner or later, that’s the way the world will go.”

Assuming electrification becomes the norm, experts say the bigger issue for SHM will be attracting drivers more with software than hardware.

“I don’t think it is going to win or lose based on its car attributes. It’s going to win or lose based on its software,” Michael Dunne, CEO of US-based automotive consultancy Dunne Insights, said of the Afeela. “I do feel as though they [SHM] are aware of this.”

The 50-50 joint venture was based on the idea of combining Sony’s expertise in image sensors, artificial intelligence, robotics, and entertainment with Honda’s strengths in automotive development, production, and after-sales service.

At a glance, the Afeela prototype does look different from a traditional car. A screen between its headlights can display battery charging status, weather information, or a personalized animation. The doors are slick and do not have handles, instead opening automatically when users approach. The steering wheel is a rectangular “yoke” designed to avoid getting in the way of a panoramic screen that spans the front seating area.

As expected from the electronics group made famous by its Walkman portable audio players, Sony has made entertainment a main feature of the Afeela. The rear seating area has displays, while multiple speakers and noise-canceling features aim to offer the ideal environment for enjoying movies, music, or games.

The 2023 prototype had a total of 45 cameras and sensors for monitoring inside and outside the vehicle, leveraging Sony’s strength as the world’s top seller of image sensors used in smartphone cameras. Data gathered by these sensors will be fed to Qualcomm chips and processed using AI to enable self-parking and other driving-assistance features. The car’s software will be updatable, much like a smartphone’s operating system.

Describing the car’s development, Kawanishi said SHM kept in mind leading players in the field, like Tesla or Chinese automakers, which he sees as pursuing a similar question, namely, how drivers can use the time in their cars differently. In SHM’s case, the focus is on entertainment.

Kawanishi has been involved in developing Sony’s PlayStation video game consoles, its robotic dog series, Aibo, and the group’s initial attempt to develop a car back in 2020, known as the Vision-S.

Afeela’s intended selling points seem to align with consumer interests. A March consumer survey by S&P Global Mobility found that around half of US respondents wanted connected services and were willing to pay for functional updates related to navigation, infotainment, and advanced driver assistance systems (ADAS).

But for now, experts are cautious, if not pessimistic, about Afeela’s upcoming debut.

Jin Tang, a senior principal researcher at Mizuho Bank specializing in Japanese and Chinese cars, said software-defined vehicles are evaluated on two criteria. “On electrification, like incorporating ‘smart cockpits,’ the car will compare well with others using Sony’s technologies,” he said, referring to the digitized design around the driver’s seat. “But I can’t predict the quality of technologies like network services, artificial intelligence, or autonomous driving. The company will probably be making improvements as they sell,” he added.

According to Dunne, automotive software is evaluated on one basic question: Is it annoying you, or is it intuitive? “Most automakers out there don’t get it right,” he said, citing episodes of in-cabin screens suddenly going blank or moving clunkily, safety signals going off frequently, and clumsy navigation.

“I would give the company the benefit of the doubt that, because it’s Sony, it will be several steps ahead of traditional automakers” in making software-defined vehicles, he said.

Sales are not the only measure of success for SHM’s parent companies, who have poured a total of JPY 50 billion (USD 333 million) into the venture. Sony has a goal of expanding its auto sensors business by serving more automakers, while Honda wants to make competitive, tech-savvy cars at a speed comparable to software development, which is much faster than legacy automakers generally move. Lessons learned from SHM could help achieve both of those aims.

Still, SHM will be working to solidify its foundation as a profitable business, according to Kawanishi.

The Afeela will be fighting for a place among the roughly 1 million EVs sold annually in the US.

“Any new models will need to compete against Tesla,” said Brent Gruber, executive director of the EV practice at JD Power. The American carmaker tops the US ranking of EV sales, with about half the market.

Dunne estimates that the Afeela will be fighting for the remaining demand with about 20 models from other manufacturers, including Hyundai and Kia, which have “done a pretty nice job with their software setup” with recent models of its all-electric Ioniq and EV6 series. Annual sales of 30,000–40,000 cars would be considered “quite happy” for SHM, he said.

EV demand is expected to cool if Trump delivers on his vow to cancel subsidies, which currently total as much as USD 7,500 for all-electric sedans priced under USD 55,000. Experts say SHM would have a good chance of selling at a price of around USD 50,000, not far above the average new vehicle price in the US.

But a heftier price tag might be more realistic, analysts say, given the large number of sensors and costliness of chips and batteries. This, in turn, would mean the target market is affluent consumers looking to buy cars with or without subsidies.

More than price, the company intends to emphasize the advanced driving and entertainment features of the Afeela.

Ryosuke Katsura, a senior technology analyst at SMBC Nikko Securities, noted the company’s partnership with US-based Epic Games, known for Fortnite video games, to develop driver assistance systems and games using augmented reality (AR).

“Cars are an interesting environment for trying out AR because passengers are looking at the real world via the glass windows, which can be used to project things. I imagine Kawanishi may be thinking such things,” Katsura said.

Nakanishi, the Japanese analyst, said SHM will “be in its element” as autonomous driving is realized. “It has strength in entertainment and games, which Tesla doesn’t have. As demand for mobility diversifies, there should be a place in the market for Afeela,” he said.

The first test of Afeela’s viability as a product is just around the corner, but Kawanishi seemed to be taking the upcoming release in stride.

“For me, launching the product isn’t the goal, it’s the starting line,” he said. The emphasis on software and update features will mark “a clear difference from the conventional world, in which you sold a car and that was it.”

This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.