Massive news this evening, with one of the biggest announcements in Formula 1 in years. Engine manufacturer Honda has confirmed that after the end of next year’s 2021 season, they are withdrawing from the sport.
This has massive implications, firstly, Honda engines currently power 4 cars on the F1 grid, leaving teams Red Bull Racing and AlphaTauri searching for a new engine supplier.
The reason Honda is leaving also has far reaching impacts with the company issuing the following statement.
“Honda needs to funnel its corporate resources in research and development into the areas of future power unit and energy technologies, including fuel cell vehicle (FCV) and battery EV (BEV) technologies, which will be the core of carbon-free technologies.”
While COVID19 has heavily impacted the budgets of automakers across the globe, it’s very telling that Honda are taking the dollars they previously invested in R&D for Formula 1 and are now putting that zero-emission drivetrains.
If you were in any doubt the world is going electric, think again. Honda may be experimenting with fuel cells as well, but I guarantee you this, the majority of future Honda vehicles will be electric, not hydrogen-powered.
According to Statista, Japan’s Honda Group, sold 4.8 million vehicles in its 2020 fiscal year, which is about 533,000 below the previous year. When you have a substantial drop in sales like that, you have to dive deep into understanding why and act quickly to respond.
With new vehicle development cycles typically taking between 4 and 6 years, if you see a downward trend in sales, you’re ability to react to that challenge, particularly if it relates to changes in customer demand, you’re capacity to respond is extremely limited.
This announcement shows Honda understand they need a new breed of products in market in the coming years and significant investments now are the only way to achieve that.
It is possible that Honda had been considering a withdraw from F1 for a while, but with the additional financial hit from COVID, it accelerated plans.
R&D investments in Formula 1, used to have direct applications to road-going vehicles, but as more vehicles on the road go electric, that R&D spend continues to get less relevant.
Things are changing fast in this space, with Honda on the record as recently as July 2019, saying that F1 was their focus, not categories like Formula E. It wouldn’t surprise me to see a future announcement from Honda, where they could like electric powertrain developments from Formula E, to future road cars.
To date, Honda have really only dipped their toe in the electric space, with the recently released Honda E, a small car that is capable of only 200kms, has a 0-100km/hr time of 9.5s and has a tiny 35.5 kWh battery. Basically they’re a long way behind the competition and need to invest heavily now to catch up.