Japanese automotive manufacturing giant Honda has logged its first annual operating loss in 70 years, after high-stakes investments in the global electric vehicle (EV) segment failed to deliver the projected returns the company counted on. For the 12-month period ending March 2026, the firm reported a staggering operating deficit of ¥423 billion, equal to roughly $2.68 billion or £1.99 billion, driven heavily by weaker-than-forecast consumer uptake of EVs across key markets.
In response to the disappointing results, Honda announced it will walk back several aggressive EV production targets, and shift to sourcing key components from lower-cost suppliers based in China as part of a sweeping cost-cutting strategy. The company also pinned a portion of its losses on shifting policy dynamics in the United States, one of its largest global markets. Changes implemented by the Trump administration in 2025 eliminated the $7,500 tax credit that U.S. consumers previously received for purchasing new EVs, and introduced new tariffs on imported cars and auto parts. Even after a late-year reduction that cut the tariff rate from 25% to 15%, the levies have squeezed profit margins for most major foreign automakers operating in the U.S. market, including Honda.
Founded as a motorcycle manufacturer before expanding into passenger vehicles, Honda has grown steadily since its 1957 stock market listing to become Japan’s second-largest automaker. Industry analysts note that the company’s large scale and long-standing legacy as a conventional gas-powered vehicle producer have left it poorly positioned to pivot quickly to match volatile swings in EV consumer demand.
Going forward, Honda will refocus its resources on its consistently profitable motorcycle division, its in-house financial services arm, and hybrid vehicle manufacturing, segments that have delivered steady returns for the firm in recent years. The company named North America, Japan and India as its top three priority markets for future growth, while confirming it has suspended planned EV and battery production facilities in Canada.
Honda CEO Toshihiro Mibe confirmed that the company is abandoning two of its most high-profile EV targets: the goal to make EVs 20% of all new car sales by 2030, and the broader plan to transition 100% of the company’s vehicle lineup to electric power by 2040. Looking ahead, Honda projects it will post an additional ¥512 billion in EV-related losses during the 2026-2027 fiscal year ending March 2027.
Danni Hewson, head of financial analysis at investment firm AJ Bell, called the 70-year losing milestone “bleak but not surprising.” “Like many legacy automakers it gambled on motorists making a quick move to EVs – and lost as the world shifted,” Hewson explained. She noted that a combination of political policy changes, persistent global cost of living pressures, and stiff competition from lower-cost Chinese EV manufacturers forced Honda to scale back its ambitious EV plans and absorb massive write-down costs.
Even with a recent uptick in EV demand driven by spiking gasoline prices tied to geopolitical tensions between the U.S., Israel and Iran, Hewson noted that large, established manufacturers like Honda face steep challenges adapting to rapid market shifts in real time. She warned that further volatility remains on the horizon, and that the industry could face additional unforeseen twists and turns in coming years that will test the resilience of legacy automakers still navigating the transition from conventional to electric vehicles.