TOKYO, Oct 25 (Reuters) – Honda Motor (7267.T) and General Motors (GM) (GM.N) are scrapping a plan to jointly develop affordable electric vehicles (EVs), the companies said on Wednesday, just a year after they agreed to work together in a $5 billion effort to bid to beat Tesla (TSLA.O) in sales.

The decision underscores GM’s strategic shift to slow the launch of several EV models to focus on profitability, as it grapples with the rising cost of United Auto Workers strikes, which surged to $200 million a 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 in a statement. “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.

GM cited a joint statement that pointed to the projects the companies are still working on together in acknowledging the end of EV plan.

“After extensive studies and analysis, we have come to a mutual decision to discontinue the program. Each company remains committed to affordability in the EV market,” the companies said in the joint statement.

JOINT PLATFORM

GM CEO Mary Barra on Tuesday during an earnings conference call said the U.S. automaker was shifting its EV push from efforts in the entry-level segments, that included a $5 billion commitment over the next several years to GM’s Bolt EV. A spokesman confirmed she was referring to the Honda EV partnership.

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.

“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,” Honda CEO Toshihiro Mibe was quoted by Bloomberg as saying in an 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.

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