Sony Honda Mobility has scrapped its joint venture plans for the Afeela EV amid slowing demand for electric vehicles, likely sparing Honda a bruising legal battle with its California dealer body over franchise laws.
The details: The Sony and Honda joint venture said Wednesday (March 25) that they were halting development of its Afeela electric vehicles as Honda moves to scale back its EV strategy more broadly.
In early March, the automaker said it was scrapping the launch of three new EVs as it faces its first annual loss in its nearly 70-year history as a listed company.
The Japanese automaker then flagged the record loss on March 12, revealing it faces up to $15.7 billion in restructuring costs tied to its EV business.
Honda is one of several automakers pumping the brakes on EVs amid slowing consumer demand and the end of federal tax incentives.
Sony-Honda said it will issue full refunds to California customers who reserved the Afeela 1 and will continue discussions on next steps.
What they’re saying: "The main surprise was that the U.S. production programme was cancelled, rather than just scaled down,” said Julie Boote, autos analyst at Pelham Smithers Associates, per Reuters. “Honda had a very ambitious EV expansion plan, which was badly affected by the changing market environment.”
Why it matters: The collapse of the Afeela plan removes a potential flashpoint over direct-to-consumer sales in California.
It also reinforces how quickly automakers are rethinking EV investments, which could reshape future product pipelines, retail strategies and competitive pressure on franchise dealers.
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Between the lines: News that the Afeela plans have been scrapped comes just weeks after a California judge allowed a lawsuit filed by the California New Car Dealers Association (CNCDA) against American Honda and Sony Honda Mobility to proceed.
The CNCDA lawsuit, filed in August, alleges the companies violated California franchise law by planning to sell Afeela vehicles directly to consumers rather than through Honda and Acura dealerships.
The court also found that Sony Honda’s $200 “Reservation Agreement” is the first step toward purchasing an Afeela vehicle and that Sony Honda is sufficiently affiliated with American Honda for the case to proceed.
Prior to the Afeela plans being scrapped, CNCDA said Sony Honda planned to deliver vehicles directly to California consumers in the second half of 2026.
Bottom line: The end of the Afeela program is both an EV retrenchment story and a dealer-franchise story. For retailers, it underscores that slowing EV demand is forcing automakers to make tougher bets, while also showing that franchise protections remain a powerful factor when new sales models collide with the traditional dealership system.
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