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Honda Reports First Annual Operating Loss Since 1957, Abandons Key EV Targets

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Honda Posts First Annual Loss Since 1957, Abandons EV Targets in Major Strategic Shift

Honda Motor Company reported an operating loss of 414.3 billion yen (approximately US$2.63 billion) for the fiscal year ended March 2026—its first such loss since 1957. The company also recorded a net loss of 423.9 billion yen.

The financial results were accompanied by a significant shift in corporate strategy, including the abandonment of previously announced electric vehicle (EV) sales targets and the indefinite suspension of a major EV and battery project in Canada.

Financial Performance

Annual Results

For the fiscal year ending March 2026, Honda reported:

  • Global Revenue: JPY 21,796.6 billion (approx. US$138 billion), a 2.2% decline compared to the prior year.
  • Operating Loss: JPY 414.3 billion, a sharp reversal from an operating profit of JPY 1,213.4 billion in the previous fiscal year.
  • Net Loss: JPY 423.9 billion, compared to a net profit of JPY 835.8 billion the year prior.

The company attributed the losses to accounting charges and restructuring costs primarily related to the cancellation and overhaul of its battery electric vehicle (BEV) strategy in North America. Total EV-related losses for the fiscal year reached 1.45 trillion yen.

Outlook

For the fiscal year ending March 2027, Honda forecasts a return to profitability, projecting an operating profit of JPY 500 billion. This forecast includes an additional JPY 500 billion in charges related to the continued BEV strategy overhaul.

The company stated that rising material prices, including impacts from the Middle East conflict, are expected to reduce operating profit by 313 billion yen during the current fiscal year.

Strategic Shift

Abandonment of EV Targets

CEO Toshihiro Mibe announced the following strategic changes:

  • The company has abandoned its targets for EVs to make up 20% of new car sales by 2030 and for a full shift to electric or fuel-cell vehicles by 2040.
  • Honda stated it will pursue carbon neutrality by 2050 through a "multi-faceted approach" including hybrids, carbon-neutral fuels, and offset technologies.
  • The company has indefinitely suspended its planned $11 billion EV and battery project in Canada.

Reallocation to Hybrids

"We are pivoting our resources toward hybrid technology, where consumer demand remains strong and margins are healthier."

Honda announced it will reallocate development and production resources toward hybrid models:

  • The company plans to launch 15 next-generation hybrid models globally by the end of fiscal year March 2030, primarily in North America.
  • It unveiled two prototypes: a Honda Hybrid Sedan Prototype and an Acura Hybrid SUV Prototype, both based on a new flexible platform.
  • Honda aims to reduce the cost of its next-generation hybrid system by over 30% and improve fuel economy by over 10% compared to the system launched in 2023.
  • Capacity at its Ohio plants will be reallocated to produce gas and hybrid vehicles.
  • Honda will work with LG Energy Solution to convert part of the EV battery production lines at their joint venture to hybrid battery production.

Regional EV Plans

  • Japan: Honda plans to expand its EV model lineup mainly in the mini-vehicle (kei car) category, starting with an electric N-BOX minicar in 2028.
  • China: Honda plans to launch plug-in hybrids and EVs based on local partner platforms.
  • North America: Several previously announced BEV models have been canceled, including the 0 Series Saloon and SUV, the Acura RSX, and the Afeela models with Sony.

Product and Technology Timeline

  • Next-generation hybrid models in North America: Large-size models launching in 2029.
  • Next-generation ADAS (Advanced Driver-Assistance Systems): Scheduled for launch in 2028, appearing in more than 15 models over five years.
  • Honda stated EV-related losses will be resolved by 2029, and it will reevaluate its EV plans in 2030.

Sales Performance

Global vehicle sales for the fiscal year ending March 2026 fell 8.9% to 3.387 million units.

  • North America: Sales decreased 3% to 1.605 million units.
  • Asia (excluding Japan): Sales dropped over 21% to 929,000 units.
  • Japan: Sales fell 4% to 605,000 units.

Motorcycle Business

Honda's motorcycle business achieved record sales volume and operating profit for the fiscal year. Global sales rose to 22.1 million units, up from 20 million the previous year. The company plans to expand production capacity in India and aims for record-high sales of 22.8 million units.

Shareholder Returns

Honda pledged at least 800 billion yen in shareholder returns over three years and maintained an annual dividend of 70 yen per share.

Following the announcement, Honda's stock rose up to 8% on the day of the financial results briefing. Macquarie analyst James Hong commented that overall execution has been slow and some strategy steps were not new.