Honda forecast: First annual loss since listing, electric vehicle strategy provisions lead to a turnaround in performance

On March 12, Honda Motor Co., Ltd. released a performance revision announcement, significantly lowering its earnings outlook for fiscal year 2025 (April 2025 to March 2026). The company expects that net profit attributable to shareholders for the fiscal year will turn into a net loss of 420 billion to 690 billion yen (approximately 18.2B to 29.8B RMB), whereas previously the company expected to still record net profit of about 300 billion yen.

At the same time, Honda made major revisions to multiple core financial indicators: operating profit was cut sharply from the earlier forecast of profit of 550 billion yen to a loss of 270 billion to 570 billion yen (approximately 11.7B to 24.6B RMB); pre-tax profit was adjusted from the expected profit of 620 billion yen to a loss of 310 billion to 650 billion yen (approximately 13.4B to 28.1B RMB). If the final figures fall within this range, it will be Honda’s first annual net loss since it went public in the 1950s.

Affected by this earnings warning, Honda’s U.S. stocks fell by about 8% at one point during intraday trading and ultimately closed at $26.09, down 5.27%. This historic swing from profit to loss and the sharp downward revision of profit expectations reflect investors’ widespread concerns about traditional automakers’ continuously rising costs during their electrification transformation.

One-time impairments drag down performance

The direct reason for Honda’s performance revision this time lies in the massive impairment treatment of its earlier investments in electric vehicles. According to the announcement, the company will terminate some of the planned development and launch of large electric SUVs as it adjusts its North America electrification product plans. The company estimates that the total amount of expenses and asset impairments related to the strategy adjustment for electrification could reach as high as 2.5 trillion yen (approximately 108.1B RMB).

Meanwhile, the operating losses of the electric vehicle business itself cannot be overlooked. The announcement shows that, for fiscal year 2025, even the electric vehicle-related business alone is expected to generate about 700 billion yen in operating losses. Against the backdrop of slowing market demand growth, high R&D spending and capacity construction have not been able to translate into effective sales in the short term, becoming the single largest factor eroding overall profits.

If an imbalance in internal input and output is the “bleeding wound” of losses, then the sudden shift in the external market environment further accelerates the rate of bleeding. In September 2025, the U.S. federal government officially canceled its policy providing a $7,500 tax credit for the purchase of new electric vehicles, directly suppressing consumers’ willingness to buy. At the same time, the number of days for electric vehicle inventory turnover in the U.S. market rose to 168 days, and dealers’ inventory pressure continued to increase. The large electric SUV project that Honda originally planned to launch in this market happens to fall into a segment where consumers’ willingness to purchase is relatively low due to issues related to price and charging convenience.

At the same time, the company expects that changes in U.S. tariff policies will result in a loss of about 385 billion yen in this fiscal year. Ongoing supply chain problems such as persistent semiconductor shortages have also had a negative impact on the traditional gasoline vehicle business of about 150 billion yen; these factors together further worsen performance.

Automotive industry observer Zhao Yongqi told a reporter from Huaxia Times that the trigger for this financial earthquake is not simply operational bleeding, but rather a mismatch between strategic pace and market realities. The global pure electric vehicle market’s growth rate is shifting from explosive expansion to a plateau period. After several years of rapid growth, the pace of increase in EV penetration rates in major European and U.S. markets is slowing down.

As Zhao Yongqi said, in January 2026, due to demand fluctuations in the two major markets of China and the U.S., global sales of new energy light vehicles declined year on year. In Europe, after subsidies were rolled back in some countries, the growth of electric vehicle registrations has struggled. In the China market, although the penetration rate of new energy vehicles continues to rise, the competitive landscape is becoming increasingly intense, and the shortcomings of traditional multinational automakers in the field of intelligentization are being highlighted. This has led to a sharp decline in sales of most traditional automakers in China, resulting in losses.

Global automakers adjust the pace of electrification

Accompanying the massive loss warning is Honda’s reshaping of its electrification targets. The company has lowered its goal of selling 2 million pure electric vehicles worldwide in 2030 to 700,000 to 750,000 units, a reduction of more than 60%. This adjustment in practice acknowledges that its earlier expectations for market growth were overly optimistic, and it also marks that its strategic focus is shifting from an aggressive commitment to pure electric investment to a more pragmatic hybrid route.

In its earnings guidance, Honda said it will reconfigure its operating resources and further strengthen the product lineup of hybrid models. Expanding its hybrid product lineup in emerging markets such as India, and pushing the introduction of next-generation hybrid models in other regions of Asia, has become its more realistic choice at this stage.

In Zhao Yongqi’s view, hybrid technology has long been accumulated by Japanese automakers such as Honda and Toyota, and it does not rely on charging infrastructure; it can improve fuel economy without changing users’ habits. For consumers at the current stage, hybrid models offer a more balanced choice between cost and convenience.

However, this does not mean that Honda will abandon the pure electric route. The company plans to export the pure electric model e:N series that will be produced in China back to Japan, exploring a path to participate in the global electric vehicle market at low cost. This model, which leverages China’s mature electric vehicle industrial supply chain for production and then supplies other markets, to a certain extent reflects a new way of thinking by multinational automakers about their global supply chain layouts.

It is worth noting that Honda’s strategic shift is not an isolated case. Just this week, Ford confirmed that terminating multiple electric vehicle projects caused a $19.5 billion accounting loss, and it will redirect the production capacity originally planned for pure electric models to hybrid models. Stellantis also recorded a one-time asset impairment of €22.2 billion due to an overestimation of the speed of electrification transition. General Motors withdrew some electrification investments and recorded a $6 billion expense. According to statistics, the total amount of EV research and development spending that U.S. automakers such as Ford, General Motors, and Stellantis have announced they will cut in recent times is already approaching $40 billion.

In Europe, Mercedes-Benz also adjusted its electrification targets earlier this year. It delayed its goal of achieving a 50% share of electric vehicle sales from 2025 to 2030, and said it will continue to invest in internal combustion engine technology. Volkswagen Group postponed its plans to expand battery plants and re-evaluated its electrification timetable.

These synchronized adjustments by traditional industry leaders reflect the industry’s renewed review of the pace of electrification transition. When consumers accept slower-than-expected adoption, charging infrastructure construction lags, and raw material costs remain high, aggressive electrification commitments are being replaced by more pragmatic business considerations.

Zhao Yongqi said the current market conditions require automakers to adjust their strategies more flexibly to adapt to changes. “In the past, some automakers may have been overly aggressive in betting on a single technology route, such as pure electric, while ignoring the diversity of markets and uncertainties. Now, running multiple technology routes in parallel has become a more reasonable choice. Traditional automakers can, according to the demands and characteristics of different markets, advance the development of multiple technology routes such as pure electric and hybrid.”

From fanaticism for a single route to parallel development of multiple technology routes, the narrative of global automotive electrification is shifting. For Honda, this loss is a financial clearing of past strategic misjudgments, and it also creates room for a subsequent new strategy that places greater emphasis on market demand and profitability. But in a competitive landscape dominated by Chinese automakers and Tesla, the time window for traditional giants to adjust their pace may not be as generous as the figures on paper suggest.