First loss in 69 years since listing! Honda suddenly "explodes": CEO takes 30% pay cut, China sales down for 5 consecutive years

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Written by | “Next Generation Vehicle Research Institute” Column Zhang Jun

Japanese automaker Honda is facing its darkest hour.

Recently, it issued a warning that its fiscal year 2025 is expected to incur losses of up to 690 billion yen (approximately 29.8 billion RMB), marking its first annual loss since going public in 1957. Honda cited reasons such as the impact of U.S. tariff policies and declining product competitiveness in Asian markets like China.

In the Chinese market, Honda has indeed fallen behind in the competition for electrification and intelligence. Two pure electric brands—e: N and Ye—have both failed to gain traction. GAC Honda and Dongfeng Honda, two joint ventures, are both experiencing declining sales, with their “slump” in China continuing for five years.

A series of setbacks has made Honda’s management feel guilty. Honda CEO Toshihiro Mibe and Executive Vice President Noriya Kaihara will voluntarily forgo 30% of their salaries within three months, while some other executives will give up 20%.

First loss since listing, executives voluntarily cut salaries by 30%

This time, Honda’s performance took a turn for the worse.

Recently, Honda Motor Co. issued a performance warning, stating that while sales expectations for fiscal year 2025 remain unchanged, operating profit has been adjusted from a previously expected profit of 550 billion yen to a loss of 270-570 billion yen. Net profit attributable to the parent company will shift from an earlier estimate of 300 billion yen to a net loss of 420-690 billion yen (about 1.81-2.98 billion RMB).

This also means Honda will experience its first annual loss since going public in fiscal year 2025.

Regarding the specific reasons for the expected loss, Honda explained in the announcement that it is mainly due to the impact of U.S. tariff policies and decreased product competitiveness in Asian markets, which have led to a decline in the profitability of its automotive business. On the same day, Honda announced the cancellation of development and market launch plans for three electric vehicles produced in North America. Honda believes that manufacturing and selling these three models could cause further losses in the long term.

From the U.S. market perspective, the U.S. government will eliminate the $7,500 federal EV tax credit on September 30, 2025. The U.S. electric vehicle market will lose key policy support, with sales expected to plateau or decline, and inventory pressures will increase. Major automakers like Ford are also readjusting their electrification strategies.

In China and other Asian countries, consumers’ valuation of cars is shifting from hardware features like fuel efficiency and interior space to software-based functions, which will be continuously upgraded based on customer preferences. With the rapid rise of new electric vehicle manufacturers leveraging shorter product development cycles and software-defined vehicle technology, competition is becoming fiercer. In such a highly competitive environment, Honda cannot offer products with better cost-performance ratios than emerging EV makers, leading to a decline in its competitiveness.

According to reports, Honda’s response strategy involves reassessing resource allocation and further strengthening its hybrid models. Additionally, Honda aims to reduce costs and improve efficiency through executive salary cuts, with CEO Toshihiro Mibe and EVP Noriya Kaihara voluntarily giving up 30% of their salaries within three months, while some other executives will give up 20%.

Five consecutive years of decline, China market leading the slump

If the adverse impact in the U.S. market is more due to external factors, then in China, Honda has failed to keep pace with the electrification and intelligence race.

Data shows that in February this year, Honda China’s sales were only 28,780 units, down 15% year-on-year; in the first two months of this year, cumulative sales were 86,269 units, a 16% decline year-on-year.

The sluggish sales in China have significantly impacted Honda’s global performance. In 2025, Honda’s global sales are expected to reach 3.522 million units, down 7.5% year-on-year. However, in China, annual sales are only 645,000 units, a 24% drop, marking Honda’s fifth consecutive year of decline in China.

Specifically, after reaching a peak of 1.627 million units in 2020, Honda’s sales in China have decreased year by year. The terminal sales for 2021-2024 were 1.5615 million, 1.3731 million, 1.2342 million, and 852,300 units respectively, with further shrinkage expected in 2025.

Currently, Honda in China mainly relies on two joint ventures: GAC Honda and Dongfeng Honda. However, both are facing operational difficulties.

Looking at GAC Honda, in February this year, sales were only 9,220 units, down 68.93% year-on-year; from January to February, total sales were 13,778 units, a 69.24% decline. This performance ranks at the bottom among GAC Group brands.

For Dongfeng Honda, February sales were 18,025 units; January-February cumulative sales were 30,592 units, down 18.6% year-on-year.

Behind the collapse of these two joint ventures’ sales is Honda China’s slow progress in electrification and intelligence, making it difficult to compete with Chinese new energy vehicle brands. Honda previously launched two pure electric brands—e: N and Ye—but the former’s awkward name made it hard for consumers to remember, while the latter was mocked online as “Huohua = cremation,” and was dubbed a “cremation car,” both brands failing to gain traction.

From Honda’s recent strategic shift, it no longer prioritizes pure electric vehicles as its main resource investment but is turning toward hybrid models. However, if it cannot keep up with Chinese consumers’ demands for intelligence, relying solely on hybrid vehicles to turn the tide will be very challenging.