Honda Reports £3.5 Billion Annual Loss, Scraps EV Production Targets
Honda, Japan's second-largest car manufacturer, has announced a JPY#423 billion operating loss for the financial year concluding March 2026. This marks the company's inaugural annual loss since its public listing in 1957. The downturn is primarily linked to substantial investments in the electric vehicle sector, where consumer demand has not met initial projections.
In response to these financial pressures, Honda has declared it will revise its EV production targets and plans to procure components from China to reduce manufacturing costs. The company cited shifts in US policy, specifically the September 2025 decision by President Donald Trump to eliminate up to $7,500 in tax credits for US EV purchasers, as a contributing factor. Additionally, 2025 tariffs on imported cars and automotive parts, though reduced from 25% to 15%, also impacted profitability across the sector.
Chief Executive Toshihiro Mibe confirmed that Honda is abandoning its aim for EVs to constitute a fifth of new car sales by 2030, alongside its more ambitious target for all vehicles to be electric by 2040. The company anticipates further EV-related losses of JPY#512 billion in the next financial year. Honda now intends to refocus on its established motorcycle business, financial services, and hybrid vehicle production, identifying North America, Japan, and India as priority markets. Plans to construct EV and battery manufacturing facilities in Canada have been suspended.
Danni Hewson, head of financial analysis at AJ Bell, commented on Honda's situation: "It's a bleak milestone for Honda but not a surprising one. Like many legacy automakers it gambled on motorists making a quick move to EVs – and lost as the world shifted." Hewson noted that political decisions, cost of living pressures, and heightened competition from Chinese manufacturers have compelled Honda to scale back its EV ambitions and absorb the associated costs. While recent months have seen a modest increase in EV demand, partially due to rising petrol prices exacerbated by the US-Israel war with Iran, she cautioned that adapting at this scale remains challenging for large enterprises, with further market volatility expected.
