Honda Net Profit Falls 42% as EV Losses and Trump Tariffs Hit Automaker Hard

For the nine months ended December 31, 2025, Honda's net profit totaled 465.4 billion yen ($3 billion), a steep decline from 805.2 billion yen in the same period a year earlier . Revenue dipped 2.2% to 15.98 trillion yen ($102.6 billion) .

The company maintained its full-year profit forecast at 300 billion yen ($1.9 billion), but warned that remaining losses from its U.S. EV business pose downside risks .

Honda's electric vehicle ambitions have turned into a financial nightmare. The company booked ¥267.1 billion in one-time provisioning and impairments related to EVs sold in the U.S. and from writing down development assets due to lineup changes .

For the 2026 fiscal year, total EV-related losses could balloon to ¥700 billion ($4.5 billion) . The automobile business slipped into a loss over the nine-month period solely due to these EV costs .

Strategic retreat: Honda has slashed its 2030 global EV sales target from 30% to just 20%, canceled development of some EV models, and terminated its EV partnership with General Motors . The company will drastically reduce purchases of GM's Ultium-based vehicles (Acura ZDX, Honda Prologue) and pay compensation .

Honda cited slowing EV demand in the U.S. market, fading incentives, and the Trump administration's rollback of EV-friendly policies as key factors .

The Trump administration's trade policies delivered another massive blow. U.S. tariffs reduced Honda's operating profit by ¥289.8 billion for the nine-month period .

The U.S. remains Honda's largest market, accounting for more than two-fifths of global sales . While the administration lowered tariffs on automobiles and parts from an initial 25% to 15%, the damage to Japan's export-reliant automakers has been severe .

Japan has pledged $550 billion in U.S. investments to mitigate trade tensions, but the impact continues to ripple through automaker earnings .

Honda's struggles extend beyond North America. In China, the world's largest auto market, Honda sales fell 16.5% year-on-year to just 57,489 vehicles in January 2026—the 24th consecutive month of decline .

Guangzhou Honda (Guangqi Honda) suffered a staggering 69.86% drop to only 4,558 units . Executive Vice President Noriya Kaihara admitted Honda is "lagging local players in China both in terms of pricing and software" .

Honda also incurred EV-related costs in China, though specific figures were not disclosed .

Amid the gloom, Honda's motorcycle business delivered a relatively healthy performance, with global sales led by India and Brazil helping offset weakness in automobile operations .

Honda is pivoting hard toward hybrid vehicles to staunch the bleeding:

• Plans to boost hybrid sales to 2.2 million units
• Abandoning the "pure EV core" strategy in favor of hybrid focus
• But not abandoning EVs entirely: Honda will still launch two new EVs in 2026—Acura RSX and Honda 0 Series SUV—with the latter hitting North America in first half of 2026

In a surprising twist, Honda's stock jumped 2.1% on the day of the earnings report, while the Nikkei 225 benchmark finished 2.3% higher, renewing a record high . The rally was partly attributed to popularity surrounding Prime Minister Sanae Takaichi, who took office in October as Japan's first female leader and recently won a landslide parliamentary election .

CFO Eiji Fujimura said the full-year outlook still faces "potential downside risks from remaining losses tied to Honda's U.S. EV business," though favorable exchange-rate conditions and vehicle sales above projections offer some offset .