The joint electric car project by Sony Group Corp and Honda Motor Co saw its annual operating loss more than double to ¥52 billion (US$362 million or RM1.5 billion) as they work to begin selling their first car, the Afeela, this year.

Sony Honda Mobility Inc disclosed the deficit in a report for the latest fiscal year through March, which was released on Monday. The prior annual loss was ¥20.5 billion. 

Electronics and entertainment conglomerate Sony and carmaker Honda unveiled their collaboration in 2022 with the goal of targeting the premium electric-vehicle (EV) market by combining Honda’s vehicle development and production capabilities with Sony Group’s expertise in image sensors and entertainment. The Afeela is scheduled to go on sale this year with a sticker price starting at US$89,900.

A representative of Sony Honda Mobility didn’t immediately respond to requests for comment.

Given that no products are on sale yet, the company didn’t record any revenue in the fiscal year through March, similar to the prior period. The loss by the venture is relatively small given the size of the two companies, which jointly posted more than ¥2.6 trillion in operating profit during the latest year. 

New vehicle development requires a lot of expenses, because of the need to build prototypes and fund research and development, while sales volumes for luxury vehicles are going to be limited, making future profitability challenging, according to Bloomberg Intelligence senior analyst Tatsuo Yoshida. 

“Although Sony Honda Mobility seems to be setting higher prices to recover costs, they may not be able to fully offset expenses,” Yoshida said.