Honda has warned it expects a huge hit to its finances because of a major reorientation of its electric vehicle (EV) strategy.
Japan’s second-largest carmaker tried to lead the charge on electric motoring but it says that US policy changes and tariffs, coupled with reduced competitiveness in Asia, are forcing it to adjust.
German performance carmaker Porsche suffered a similar hit to its balance sheet in 2025 amid the same bid to partially pull the plug on EVs, with news of its almost obliterated annual profits released earlier this week.
What did Honda say on the matter?
“Honda believed EVs would be the optimal solution from a long-term perspective. Based on this belief, Honda shifted its strategic direction towards the popularization of EVs,” the company said on Thursday.
It said the profitability of its business was declining because of “the United States government policy shift including the imposition of import tarfiffs.”
Honda pointed to the abolition of US tax incentives for EV purchases and the easing of fossil fuel regulations under President Donald Trump.
It also noted a decline in the competitiveness of its products in Asia, as China in particular provides importers more and more homemade competition — not least affordable EVs — in its market.
In response to the slowdown of the EV market in North America, Honda said it had decided to cancel the launch and development of certain electric models there.
Net loss forecast for current financial year
The company said that in total, it anticipated expenses and losses in the region of 2.5 trillion yen (roughly $15.7 billion or €13.6 billion) related to the pivot, over the course of several years.
For the current financial year to the end of March, it forecast a net loss of between 420 billion and 690 billion yen, as opposed to an earlier profit projection of around 300 billion yen.
Honda also said it could write down investments in China in response to the intensified competition there.
Although the changes are much less pronounced, EV subsidies and government incentives in Europe are also coming under some strain. The EU halted its plans to entirely ban the sale of non-electric cars as of 2035 in December, in no small part amid pressure from Germany.
It’s not yet clear what new targets or proposals will emerge, with negotiations ongoing.
In 2025, pure EVs (so excluding various forms of hybrids that might be the most likely to receive some kind of grace period past 2035) accounted for only 17.4% of new cars sold in the European Union, according to the ACEA European Automobile Manufacturers’ Association. That was an increase on the previous year, but still leaves a vast gap to the all-electric target that was previously supposed to be attained within a decade.
Edited by: Kieran Burke
