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Honda has reported its first annual loss in 70 years, recording a total operating deficit of $2.68 billion for the fiscal year ending March 2026. The company attributed the loss to a miscalculation in the electric vehicle (EV) market, where demand fell significantly short of forecasts. To mitigate rising costs, Honda is scaling back its EV production targets and shifting its supply chain to source cheaper parts from China.
It cited changes in US policy as adding to its losses, including tax incentives having been taken away for US consumers purchasing EVs, and the imposition of tariffs.
US consumers could previously receive up to $7,500 in tax credits if they purchased a new EV, but this was scrapped by President Donald Trump in September 2025. His tariffs on imported cars and auto parts in 2025 also bruised profits at several major auto manufacturers, despite a reduction in the tariffs from 25% to 15%.
Honda, which was first listed on the stock market in 1957, has grown over the years to become Japan's second largest car firm. Analysts said its huge size and legacy nature make it difficult to adapt quickly to fast dips and rises in EV demand.
Honda said it was now going to focus on growing its successful motorcycle business, its financial services and its hybrid vehicle manufacturing.
It cited North America, Japan and India as "priority markets for its future growth" - although it suspended its plans to build EVs and batteries in Canada.
Chief executive Toshihiro Mibe said Honda would scrap its aims for EVs to make up a fifth of new car sales by 2030.
He added that Honda was also scrapping its target for all of its vehicles to be EV by 2040.
Honda expects ¥512bn in EV-related losses in the next financial year ending March 2027.
