Honda posts first annual loss in 70 years as EV demand falters

Japanese car giant Honda posted its first annual loss in 70 years after failing to capitalize on its electric vehicle investments.

Demand for EVs fell short of company forecasts, leading to an operating loss of ¥423bn ($2.68bn; £1.99bn) for the financial year ending March 2026.

Honda said it would scrap some EV production targets and source cheaper parts from China to cut costs.

The company cited changes in U.S. policy — including the removal of tax incentives for EV buyers and new tariffs — as factors behind the loss.

Previously, U.S. consumers could claim up to $7,500 in tax credits for purchasing a new EV, but President Donald Trump eliminated the program in September 2025.

Trump’s 2025 tariffs on imported cars and auto parts, though later reduced from 25% to 15%, also hurt profits at major automakers.

Honda, first listed on the stock exchange in 1957 and now Japan’s second-largest carmaker, struggles to adapt quickly to shifting EV demand due to its size and legacy operations, analysts said.

Moving forward, Honda plans to expand its profitable motorcycle business, financial services, and hybrid vehicle manufacturing.

The company identified North America, Japan, and India as "priority markets for its future growth" — but suspended plans to build EVs and batteries in Canada.

Chief Executive Toshihiro Mibe said Honda would abandon its target for EVs to account for one-fifth of new car sales by 2030.

He added that the company would also drop its goal for all vehicles to be electric by 2040.

Honda expects ¥512bn in EV-related losses in the next financial year ending March 2027.

"It’s a bleak milestone for Honda but not a surprising one," said Danni Hewson, head of financial analysis at AJ Bell.

"Like many legacy automakers it gambled on motorists making a quick move to EVs — and lost as the world shifted."

She said political changes, cost-of-living pressures, and competition from Chinese companies forced Honda to roll back EV plans and "swallow the costs."

Hewson noted that although EV demand has risen in recent months due to higher petrol prices linked to the U.S.-Israel conflict with Iran, "companies like Honda are having to adapt on the fly which is tough for businesses of this scale."

She warned that the market could face further "twists and turns" ahead.