Breaking news! Just now, the trillion-dollar giant "collapsed"

【News Brief】Honda Motor Co. is expected to post an annual operating loss of 270 billion—570 billion Japanese yen; pre-market U.S. stock trading falls by more than 8%

Honda Motor suddenly “blows up”!

On March 12, Honda Motor Co. released a statement saying that its fiscal year 2025 (April 1, 2025—March 31, 2026) will record a massive loss. Of that, it expects an operating loss of 270 billion—570 billion Japanese yen, after previously projecting income of 550 billion Japanese yen; it expects a net loss of 420 billion—690 billion Japanese yen, after previously projecting income of 300 billion Japanese yen.

It is said that this is Honda’s first annual loss since it went public. The company said it has canceled parts of its plans for developing and launching electric vehicles for North America, and expects expenses and losses arising from strategic revaluation to reach up to 2.5 trillion Japanese yen.

After the news was announced, Honda shares in pre-market U.S. trading plunged by more than 8% at one point.

Let’s take a look at the details——

A major shift in the auto industry: Honda’s profitability is sliding

In its announcement, Honda said that, with the goal of “achieving carbon neutrality across all products and business activities involving Honda by 2050,” it has been working to reduce its impact on the environment. Based on this goal, Honda has shifted its strategic direction toward promoting electric vehicles.

However, Honda’s business profitability is declining, mainly for two reasons: first, changes in U.S. tariff policy have an adverse impact on its gasoline-engine and hybrid vehicle businesses; second, by putting more resources into developing pure electric vehicles, Honda’s products’ competitiveness in Asian markets has fallen.

In addition, Honda believes that the business environment in the auto industry it is in is undergoing major changes, and the outlook remains unclear. In the United States, influenced by multiple factors such as the loosening of regulations related to fossil fuels and adjustments to pure electric vehicle subsidy policies, the growth rate of the pure electric vehicle market has slowed.

Meanwhile, in China and other Asian countries, customers’ focus in automobiles is shifting from hardware performance such as fuel economy and in-car space to software functions that can be continuously upgraded based on user needs. In a harsh competitive environment, Honda has not launched products with better price-to-performance than those from emerging pure-EV companies, leading to a decline in competitiveness.

Canceling some pure electric vehicle models: expected to generate massive losses

Honda Motor said that after careful consideration, it ultimately decided to cancel development and launch plans for some pure electric vehicle models originally scheduled to be produced in North America. Honda believes that in the current business environment, where demand for pure electric vehicles has fallen sharply, producing and selling related models may, in the long term, cause losses to further expand. It is understood that the pure electric vehicle models whose plans were halted are Honda’s 0 Series SUVs and sedans, as well as the Acura RSX.

Based on this decision, Honda expects to incur losses from write-offs and impairment losses of tangible and intangible assets originally planned for producing the related pure electric vehicle models, as well as losses caused by additional costs related to canceling the development and launch of those models. Considering intensifying competition in the China market, Honda will re-evaluate the recoverable amount of its investments accounted for under the equity method in the China market, and expects this type of investment to result in impairment losses.

In the consolidated financial statements for the current fiscal year, Honda expects the above adjustments to generate 820 billion—1.12 trillion Japanese yen in operating costs and expenses, with the portion of losses attributable to investments accounted for under the equity method totaling 110 billion—150 billion Japanese yen. In addition, the company expects to record 340 billion—570 billion Japanese yen in special losses in the non-consolidated financial statements.

Given this revision to its earnings outlook, as well as losses stemming from adjustments to its electrification strategy, some of Honda’s executive directors will voluntarily return part of their compensation. In addition, Honda’s President and Representative Executive Director, and its Senior Vice President and Representative Executive Director, will forgo the short-term performance bonus (STI) for the fiscal year ending March 31, 2026. As a result, the annual compensation of the Representative Executive Directors will be reduced by approximately 25%—30% compared with the standard level.

Honda Motor said that, given the recent slowdown in the growth rate of the pure electric vehicle market in North America, Honda will readjust its allocation of resources and further strengthen hybrid vehicle models. In addition to Japan and the U.S., its core markets, Honda will expand its product lineup in India, where market expansion is expected, and enhance cost competitiveness. In other Asian countries and regions, Honda will fully improve competitiveness by launching a new generation of hybrid vehicle models and re-optimizing its resource allocation.

According to information, as one of the most aggressive players among Japanese automakers in its electrification transition, Honda had planned to fully stop selling internal combustion engine vehicles by 2040 and to increase its electrification investment cumulatively to 10 trillion Japanese yen, but it suffered a severe setback in reality. Sales of electric vehicle models such as the Acura ZDX, which Honda developed in cooperation with General Motors, have been dismal; production has been announced to be discontinued, and the partnership has been gradually phased out. At the same time, Honda’s plan to develop pure electric panel vans in Europe was halted, and the global target for annual pure electric vehicle sales in 2030 was sharply lowered from 2 million units to 700k—750k units.

As of the close on March 12, Honda Motor’s share price in Japan was 1,448.5 Japanese yen per share, and its total market capitalization was 25k Japanese yen.