First Loss Since Listing! Honda Projects Operating Loss of 420-690 Billion Yen for Fiscal Year 2026, Significantly Scaling Back Electrification Strategy | Earnings Insights

Honda Releases Revised Earnings Forecast, Announces Major Cutback in Electric Vehicle Strategy, Cancels Three North American Production Models, and Downgrades Full-Year Profit Expectations to Losses—Potentially the Company’s First Annual Loss Since Listing

Key Data:

Revenue: Maintained at 21.1 trillion yen.

Operating profit: Revised from +550 billion yen to a loss of 2.7 trillion to 5.7 trillion yen.

Pre-tax profit: Revised from +620 billion yen to a loss of 3.1 trillion to 6.5 trillion yen.

Net profit attributable to shareholders: Revised from +360 billion yen to a loss of 4.2 trillion to 6.9 trillion yen.

The company has decided to cancel the development and launch plans for three electric vehicle models—Honda e SUV, Honda e Saloon, and Acura RSX—citing significant slowdown in U.S. EV demand, changes in U.S. tariff policies, and declining competitiveness in the Chinese market.

Honda states that losses related to the reevaluation of its electrification strategy over the next few years could total up to 2.5 trillion yen. The company plans to hold a press conference in May to disclose detailed plans for its mid- to long-term automotive strategy overhaul.

Significant Downgrade in Earnings Forecasts, Expecting First Annual Loss Since Listing

Honda has revised its consolidated operating profit forecast for the fiscal year ending March 2026 from 550 billion yen to a loss of 2.7 trillion to 5.7 trillion yen, a change of up to 8.2 trillion to 11.2 trillion yen. Pre-tax profit is also cut from 620 billion yen to a loss of 3.1 trillion to 6.5 trillion yen.

Net profit attributable to shareholders is projected to plummet from 360 billion yen to a loss of 4.2 trillion to 6.9 trillion yen, with earnings per share adjusted to a loss of 105.07 to 172.62 yen, compared to 178.93 yen in the previous fiscal year.

Loss components include 8.2 trillion to 11.2 trillion yen in operating expenses and 110 billion to 150 billion yen in equity method investment losses in consolidated financial statements; in standalone (non-consolidated) reports, a special loss of 340 billion to 570 billion yen is expected.

Despite the substantial downward revision, Honda maintains its original dividend per share forecast, citing the use of return on equity (ROE) as a shareholder return indicator to ensure dividend stability and sustainability.

Demand Slowdown and Tariff Impacts Double-Pressuring Electrification Strategy

Honda’s strategic reversal stems from multiple internal and external pressures worsening simultaneously.

Externally, U.S. relaxation of fossil fuel regulations and adjustments to EV subsidies have significantly slowed local EV market growth; at the same time, new U.S. tariff policies have directly impacted profitability of Honda’s traditional internal combustion and hybrid vehicle businesses.

Honda admits that shifting more resources to EV development has led to a decline in competitiveness of its traditional product lines in Asian markets, creating a dilemma of balancing investments.

The company acknowledges that forcing the mass production of these three EV models under current market conditions could “potentially lead to further long-term losses.”

Shift in Strategic Focus to Hybrids, with Emphasis on India Market

In response to these pressures, Honda clearly shifts resource allocation toward hybrid models and undertakes structural regional adjustments.

Beyond Japan and the U.S., Honda will focus heavily on investing in India, expanding its model lineup and improving cost competitiveness, as it anticipates strong growth potential in the Indian market.

In other Asian markets, Honda plans to introduce next-generation hybrid models and reassess resource distribution to rebuild product competitiveness.

On cost management, Honda states it will establish a fixed cost structure aligned with its scale of operations. The company does not entirely abandon electrification but has adopted a more cautious tone, indicating future EV plans will “be flexibly advanced from a long-term perspective, balancing profitability and market trends.”

Executive Compensation Reduced by Approximately 25% to 30% as a Show of Accountability

In corporate governance, Honda announced that some senior executives will voluntarily return part of their compensation in response to the sharp decline in performance.

Specifically, the President and Representative Executive Officer and Vice President and Representative Executive Officer will refund 30% of their monthly salary for three consecutive months in fiscal 2027.

Members of the executive committee involved in automotive operations and management executive officers will refund 20% of their monthly salary, except for those retiring by March 31, who are not included.

Additionally, these two representative executive officers will waive their short-term performance-based bonuses (STI) for fiscal 2026. Overall, the annual compensation of these officers will be reduced by approximately 25% to 30% compared to standard levels.

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