Following tighter emissions requirements and reduced overall demand, Honda Motor Co. Ltd (HMC) is reportedly getting out of the diesel car business in Europe by 2021.

The Japanese automaker is now looking to shift its focus to all-electric propulsion systems, which it said would be used in all of its cars in the region by 2025, Reuters reported. The EU auto market requires all cars to be compliant with the more stringent emissions requirements by 2021.

Honda joins Daimler AG (DAI.DE), which announced it was leaving the internal combustion engine business last week to focus on electric vehicles. For Honda, the move to all EVs is expected to make up two-thirds of its vehicle lineup by 2030, up from the less than 10 percent it does now, the news outlet said.

Honda also told Reuters that it will reduce the number of car models it produces by a third of what it offers now by 2025. This is part of an effort that reportedly will save the company 10 percent in production costs, allowing it to shift funds towards research and development of electric vehicle technologies.

Shares of Honda stock were down 0.79 percent as of 10:01 a.m. ET on Tuesday while shares of Daimler stock were down 0.93 percent at the same time.

The Honda roadster EV-Ster electric car is displayed on media day at the Paris Mondial de l'Automobile, Sept. 28, 2012. REUTERS/Jacky Naegelen