Honda Motor has reported its first annual loss since becoming a publicly traded company in 1957, marking a major setback for the Japanese automaker’s electric vehicle strategy amid slowing consumer demand and shifting U.S. policies.
The company disclosed this week that mounting restructuring expenses tied to its EV business contributed to a $2.7 billion loss, while broader electric vehicle-related losses are projected to reach approximately $16 billion.
Honda said weakening demand for electric vehicles, combined with changing regulations and incentives in major markets, forced the company to reassess its long-term plans.
Weak EV Demand Hits Honda Hard
In a statement, Honda acknowledged that interest in electric vehicles has fallen sharply.
“EV demand has declined considerably, due to the rollback of environmental regulations in the U.S. and other factors,” the company said.
The automaker had aggressively invested in electric vehicle expansion in recent years, but slowing adoption rates have pressured profitability across the industry.
Honda said restructuring costs tied to those EV operations totaled roughly $9 billion.
Honda Scales Back Major EV Goals
Honda CEO Toshihiro Mibe said Thursday that the company would abandon a previous target that aimed for electric vehicle sales to account for 20% of profits by 2030.
The company had also previously outlined plans to transition fully toward electric or fuel-cell vehicles by 2040.
The revised strategy reflects a broader shift occurring across parts of the global auto industry as manufacturers respond to softer EV demand and evolving government policies.
Despite the setbacks, Honda said it still plans to continue research and development efforts focused on future vehicle technologies, including EV batteries.
“We will get back on a growth track,” Mibe said, while adding that the company would continue pursuing carbon neutrality alongside expanded work on hybrid and gasoline-powered vehicles.
Trump Administration Policies Reshape EV Market
Honda specifically referenced changes in U.S. policy as part of the slowdown affecting electric vehicle sales.
The Trump administration has moved away from several electric vehicle incentive programs, including efforts to block California’s aggressive EV mandates and eliminate the EV tax credit introduced under former President Joe Biden.
Those policy changes have contributed to broader uncertainty in the electric vehicle market, particularly as automakers weigh consumer demand against the high costs of transitioning production systems.
Motorcycle Sales Help Offset Losses
Although Honda’s EV operations struggled, the company found support from another part of its business: motorcycles.
Honda reported selling 20 million motorcycles more than the previous year, helping generate a slight revenue increase for the fiscal year ending in March.
Overall revenue rose by roughly half a percent to $138 billion, according to the company.
Honda remains a dominant motorcycle brand in several international markets, including India.
Vehicle Sales Decline Globally
Honda also reported a decline in global vehicle sales during the fiscal year.
The company sold 3.4 million vehicles worldwide, down from 3.7 million the previous year.
The decline underscores growing challenges facing traditional automakers as they attempt to balance investment in electric vehicles with ongoing demand for gasoline-powered and hybrid models.
Honda’s results reflect wider turbulence across the automotive industry as companies reassess the pace of the transition toward fully electric transportation.
Automakers worldwide have invested billions into EV production and battery development, expecting strong long-term growth. But weakening consumer demand, high production costs and changing government incentives are forcing many manufacturers to rethink timelines and financial expectations.
Despite its historic loss, Honda is forecasting a rebound and expects to return to profitability, projecting a $1.7 billion profit for the fiscal year ending March 2027.
The company’s revised strategy suggests Honda will increasingly rely on hybrids, traditional gasoline vehicles and motorcycles while continuing to develop future electric technologies at a slower pace.
