I get it; it’s not an easy time for a legacy automaker to be selling electric vehicles, what with incentives being gutted and Chinese automakers knocking at the door. But Honda is taking it to another level.

This week, Honda killed its paltry — and frankly unpromising — EV programs. What little motivation Honda had to compete in the EV arena is apparently gone, and along with it, any chance of surviving the current wave of disruption that’s sweeping the industry.

The company casts blame on U.S. tariffs and Chinese competition, two easy targets. But it never really had a viable EV strategy to begin with.

Honda kicked things off on Thursday by halting development of the electric Acura RDX and the Honda 0 sedan and SUV, three models that were the company’s first ground-up EVs — but about which very little was shared with outsiders. It continued on Friday, with Automotive News reporting that Honda was going to stop production of the Prologue, a vehicle that was essentially designed and entirely built by GM. 

The decision could backfire in a number of different ways, but there are two that I’d argue are most important. By shelving EVs, Honda will fall farther behind in two of the biggest shifts sweeping the automotive industry: electric drivetrains and software-defined vehicles.

Missed EV opportunities

To Honda — and to many legacy automakers still early in the transition— an EV is just a car with a different drivetrain. I can imagine Honda executives thinking that they can wait out the awkward transition period and, when motors and batteries are fully sorted, simply swap out the fossil fuel bits. How hard could it be?

That’s a mistake, of course. Many automakers have found that dropping batteries into a car originally designed for an internal combustion engine doesn’t work out so well. It might shortcut the development cycle, but the resulting product ends up heavy, inefficient, and more costly to produce.

When developed as an original product, EVs offer automakers a chance to rethink the automobile, and in the process, make it cheaper. 

Take Ford, for example. The Mustang Mach E has been a sales success, but not a financial one for Ford. The Mach E is based on a heavily modified version of the platform that also underpins the Escape, a fossil fuel crossover. Part of the problem, Ford CEO Chris Farley said in a recent interview, was that legacy engineering decisions held the product back: The Mach E’s wiring harness is 70 pounds heavier than Tesla’s, for example. Small errors like that compound themselves in a product as complex as an automobile.

Honda will also miss out on several learning opportunities. There’s learning by doing, both in development and manufacturing. There’s also learning to cultivate new suppliers and supply chains. It will also miss out on receiving critical customer feedback — what do people really value in their EVs?

Sayonara, software-defined vehicles

Here, Honda is setting itself up for failure on the second disruption sweeping the automotive industry: the software-defined vehicle (SDV), which has core capabilities that can be upgraded and improved over time.

Consumers, mostly those who buy EVs from the likes of Tesla, Rivian, and BYD, have grown accustomed to the frequent updates, slick infotainment software, and advanced driver assistance systems of Tesla, Rivians, Nio or Xiaomi. Honda has yet to make significant progress in any of those domains.

SDVs don’t have to be EVs, but they tend to go hand-in-hand. The large battery in an EV makes it easier to feed powerful computers, and it allows things like over-the-air updates to happen when the car is parked and “off.” Could Honda make a fossil fuel SDV? Sure, but it’s unlikely to for the same reason it’s backing away from EVs: the old way of doing things is easier and more profitable, for now.

What does Honda stand for?

Honda is facing an identity crisis. At its core, it’s an internal combustion engine company. It makes really good engines, and that’s starting to matter less and less. 

Other traits of its cars are also under assault. For years, the company has prided itself on making driver’s cars. They’re lightweight, efficient, and handle well. But when the car drives itself, what does a “driver’s car” even mean?

Putting autonomy aside, I’d argue that the market for a driver’s car is limited anyway. People are drawn to Honda because they’re reliable and reasonably priced. The fact that they handle well is icing on the cake, maybe helping consumers break a tie if they’re torn between two brands.

But EVs promise to be significantly more reliable than fossil fuel vehicles, and as Chinese automakers show, once battery prices come down, so do overall vehicle costs. If Honda can’t compete on reliability or price, consumers will balk.

That already appears to be happening in China. Honda said as much in its recent earnings report. “Honda was unable to deliver products that offer value for money better than that of newer EV manufacturers, resulting in a decline in competitiveness,” the company said. Headwinds in China contributed to the company’s nearly $16 billion losses last year. Without a plan for EVs, it’s only a matter of time before Honda suffers the same fate elsewhere.