Honda expects ¥690 billion net loss post EV plan cancellation

Honda's international shares have dropped sharply after the Japanese automaker warned of massive EV-related charges and scrapped its planned electric models. The carmaker mentioned highlighting growing turbulence in the global electric-vehicle transition as the reason.

Honda expects to book up to ¥2.5 trillion ( ₹1.44 trillion) in charges tied largely to its electric-vehicle strategy. As a result, it now expects an operating loss of ¥270 billion to ¥570 billion for the fiscal year ending March. The carmaker warns its net loss could reach ¥690 billion.

Julie Boote, an analyst at London-based research firm Pelham Smithers Associates, wrote in a report, “Booking large losses now is likely the better option than suffering from poor performances over many years. However, there is no guarantee that Honda will be able to improve its internal combustion engine business either."

Shares fall after announcement

The announcement triggered a sell-off in Tokyo trading, with Honda Motor Co. stock dropping as much as 5.9 per cent, its biggest intraday decline since April last year.

As part of restructuring, the automaker confirmed it will cancel the development and introduction of three EV models planned for North America. The company had previously signalled rising EV-related expenses, but the scale of the charges surprised investors.

“The situation changed far more rapidly than we expected," said Chief Executive Officer Toshihiro Mibe. “The suspension of EV subsidies in North America undercut growth, and competition in China meant we couldn’t provide attractive models or maintain our competitive edge," he added.

Global automakers reassessing EV bets

Honda joins several global carmakers that are revising their electrification strategies amid uncertain demand and rising costs.

• Stellantis has taken more than €22 billion in charges, largely tied to EV strategy adjustments.
• Ford Motor Co. has also booked about $19.5 billion in hits linked to restructuring its electric-vehicle business.

Analysts say Honda’s financial impact is particularly large because the company had been one of the more aggressive investors in EVs for North America.

Challenges in China and tariffs in the US

Beyond EVs, Honda’s automotive division has struggled due to US tariffs and declining competitiveness in Asia, particularly in China, where domestic brands have rapidly gained market share. Chinese automaker BYD has been a major beneficiary of this shift and recently became the world’s largest EV manufacturer.

Hybrids and India to get more focus

In response, Honda plans to strengthen its hybrid vehicle lineup and reallocate resources away from some EV projects. The company also identified India as a key growth market for both cars and motorcycles.

Honda’s motorcycle division continues to perform strongly, helping offset weakness in its car business. The company said it will present a revised global business strategy in May as it attempts to restore profitability.

(With inputs from Bloomberg)

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