Honda Is Developing New Hybrids and Battery-Powered Cars, Ditching Old Tech

NEW YORK (TheStreet) -- Carmaker Honda (HMC) said it will drop its current Civic hybrid and compressed natural gas vehicles to concentrate instead on development of new hybrids, battery-powered cars and new hydrogen-powered fuel cell vehicles.

John Mendel, executive vice president of North American operations, said demand for the discontinued vehicles was too weak to justify continued production. The new hybrid will be introduced within three years.

Honda "is developing an extensive new generation of electrified vehicles," he added. The automaker expects the new models to result in "significant" sales, which he didn't quantify.

Last week was a rough one for Honda's stock after the automaker restated 2014 financial results to account for an additional $363 million to cover U.S. recalls of defective Takata (TKTDY) airbags. Shares fell almost 2% in trading on Friday.

Over the past decade, Honda's stock has kept up in its peer group and with Japan's stock market. Honda shares are up 51% for the decade, compared with 119% for Toyota (TM), 16% for Nissan (NSANY) and 79% for the Nikkei 225 Index.

The two equity analysts that follow Honda's American depositary receipts rate the security a buy, according to Yahoo! Finance.

The uproar over deaths and injuries attributable to the defective airbags has engulfed several other automakers as well, Mendel noted. The automaker is doing everything it can, he said, to find alternate suppliers and replace defective equipment.

Though Honda gained distinction for its innovative and highly fuel-efficient gasoline engines in the 1980s and 1990s, Toyota grabbed a great deal of popular attention, as well as customers, with its Prius line of gas-electric hybrids.

Honda's gas-electric hybrids used a different technology than Toyota's, which Honda called integrated motor assist. Consumers gravitated to Toyota, perhaps because its approach to marketing. Toyota created and designed a distinct car model and a snappy new name -- Prius -- that deliberately proclaimed to the world: "Look at me! I'm saving gasoline."

With its current generation of hydrogen fuel-cell vehicle, Honda chose the name Clarity, perhaps a clue to the automaker's tactical thinking for its new generation of gas-electric hybrids. A Honda spokesman confirmed that the automaker is considering "new approaches" for how to market and promote its new hybrids, fuel cell cars and battery-powered vehicles.

Honda's natural-gas burning engine, offered on the Civic, looked promising when it was introduced in 1998. The rising price of gasoline, low emissions and wide availability of natural gas offered some compelling consumer advantages.

Mendel said disadvantages, such as difficult refueling options, overcame the advantages for too many consumers.

"We tried and tried and tried," he said. Honda even invested in a small company that sold home refueling stations that could be attached to a natural gas line.

According to the Environmental Protection Agency, the top models for fuel efficiency in 2015 (not counting battery-powered, hydrogen or plug-in hybrids) are the Toyota Prius and Prius C, with 50-mile-per-gallon combined city and highway ratings. Third is Honda's Accord hybrid with 47-mile-per-gallon ratings and Honda's Civic with 45-mile-per-gallon combined ratings.

This article is commentary by an independent contributor. At the time of publication, the author held no position in the stocks mentioned.

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