TOKYO, (Reuters) - Honda Motor (7267.T) and General Motors (GM) are scrapping a plan to jointly develop affordable electric vehicles (EVs), the Japanese company said on Wednesday, just a year after they agreed to work together in a bid to beat Tesla in sales.
The decision underscores GM's (GM.N) strategic shift to slow the launch of several EV models to focus on profitability, as it grapples with the rising costs of United Auto Workers strikes, which surged to $200 million per week this month.
The U.S automaker on Tuesday withdrew its previous 2023 profit outlook.
"After conducting some research and analyses, both parties decided to end the development," Honda said. "Each company will continue to work towards offering affordable models to the EV market."
The Japanese company said there was no change in its plan to sell only electrified vehicles by 2040.
The two firms agreed in April last year to develop a series of lower-priced EVs based on a new joint platform, producing potentially millions of cars from 2027.
The automakers had said the deal was for "affordable" EVs, including compact crossover vehicles, built using GM's Ultium battery technology.
Bloomberg first reported the decision, citing an interview with Honda CEO Toshihiro Mibe.
"After studying this for a year, we decided that this would be difficult as a business, so at the moment, we are ending development of an affordable EV," Mibe said in the interview.
A Honda spokesperson said its separate partnership with GM and its Cruise unit would not be impacted by a recent safety incident in California which led to a suspension of the robotaxi firm's driverless testing permit in the U.S. state.
California on Tuesday ordered Cruise to remove its driverless cars from state roads, calling the vehicles a risk to the public and saying the company had "misrepresented" the safety of the technology.
Honda said last week it aimed to establish a joint venture with GM and Cruise in the first half of 2024 to begin a driverless ride service in Japan in early 2026.
GM did not immediately respond to Reuters' request for comment.