Honda Records First Annual Loss in Seven Decades
Automotive giant Honda has reported its first annual loss in 70 years, as its investments in the electric vehicle (EV) sector have not yielded the expected returns.
The demand for EVs has fallen short of Honda's projections, resulting in total operating losses of ¥423 billion ($2.68 billion; £1.99 billion) for the fiscal year ending March 2026.
Adjustments to EV Strategy and Cost Management
In response, Honda announced it will reduce some of its EV production targets and plans to source parts from China, where manufacturing costs are lower, in an effort to control expenses.
The company attributed part of its financial losses to changes in US policy, including the removal of tax incentives for American consumers purchasing EVs and the imposition of tariffs.
Previously, US consumers could receive up to $7,500 (£5,500) in tax credits when purchasing a new EV, but this incentive was eliminated by President Donald Trump in September 2025.
Additionally, tariffs on imported vehicles and auto parts introduced in 2025 negatively impacted profits for several major automakers, despite a reduction in tariff rates from 25% to 15%.
Honda’s Market Position and Strategic Focus
Honda, which was first listed on the stock market in 1957, has grown to become Japan's second-largest car manufacturer. Industry analysts note that Honda's large size and established legacy make it challenging to quickly adapt to rapid fluctuations in EV demand.
The company stated it will now concentrate on expanding its successful motorcycle division, financial services, and hybrid vehicle production.
Honda identified North America, Japan, and India as "priority markets for its future growth," although it has suspended plans to manufacture EVs and batteries in Canada.
Revised EV Sales Targets
Chief Executive Toshihiro Mibe announced that Honda will abandon its previous goal of having EVs constitute 20% of new car sales by 2030.
He also confirmed that the target for all Honda vehicles to be electric by 2040 has been scrapped.
Honda anticipates EV-related losses of ¥512 billion in the upcoming fiscal year ending March 2027.
Industry Expert Commentary
"It's a bleak milestone for Honda but not a surprising one," said Danni Hewson, head of financial analysis at AJ Bell.
"Like many legacy automakers it gambled on motorists making a quick move to EVs - and lost as the world shifted."
She noted that political factors, the cost of living, and competition from Chinese companies compelled Honda to cancel EV plans and "swallow the costs."
Hewson added that although EV demand has increased recently due to rising petrol prices linked to the US-Israel conflict with Iran, "companies like Honda are having to adapt on the fly which is tough for businesses of this scale."
She warned that the market could face further challenges with more "twists and turns" ahead.
