A decade ago, Honda and Sony partnering with each other would have resulted in a Gran Turismo concept at best. However, today it has translated into the sleek-looking Afeela Joint EV project. But there’s one problem: before even selling a single car, Sony Honda Mobility has posted an operating loss of approximately $362 million (¥52 billion).

It’s not just a matter of pre-launch development expenses either. According to recently released financial disclosures, losses more than doubled compared to last year’s ¥20.5 billion deficit, highlighting just how expensive it is to play catch-up in the premium EV market. Set to debut later this year, the Afeela will command a starting price of $89,900, a clear sign of the market positioning the joint venture targets, but also underscoring the challenges of recouping such heavy upfront investments.

A Challenging Entry

Any new car launch is going to incur losses to begin with; that’s practically a given. And with Honda and Sony’s war chest seemingly well-stocked (combined, the two Japanese companies pocketed over ¥2.6 trillion in operating profit last fiscal year), it’s unlikely that the project will put either at financial risk.

Read: Watch Sony Exec Drive Afeela EV With A PlayStation Controller

But the market Afeela will be entering won’t be without its hurdles. Analysts suggest that luxury electric vehicles, while highly attractive to premium buyers, typically come with high development costs: think extensive R&D, complex software integrations, and the pricey task of prototype building. Bloomberg Intelligence analyst Tatsuo Yoshida points out that although the high sticker price of the Afeela aims to offset these expenses, fully covering these substantial costs through sales alone might prove challenging.

Late To The Party

Adding to the complexity, the Afeela will launch into a market where Tesla, Mercedes-Benz, BMW and other established players already dominate (and that’s without mentioning the Chinese, of course…) , making Sony and Honda’s mission to carve out their own niche all the more difficult. But both companies remain confident, banking on a combination of Honda’s proven engineering expertise and Sony’s strength in software and entertainment tech to win over buyers.

Whether the Afeela becomes a hit or remains an ambitious footnote, the venture highlights one thing clearly: even for giants like Sony and Honda, the transition to electric luxury is neither cheap nor easy.