Honda Motor (NYSE:HMC) reported a full-year operating loss after booking large EV-related charges, while executives outlined a broad reset of the automaker’s electrification and automobile business strategy.
Director, President and Representative Executive Officer Toshihiro Mibe said Honda recorded total EV-related losses of JPY 1.5778 trillion for the fiscal year ended March 2026. The charges included provisions and impairment losses tied to EVs already sold in the U.S. and additional losses following the cancellation of North America-produced EV models.
As a result, Honda posted an operating loss of JPY 414.3 billion for the year. Excluding the EV-related losses that affected operating profit, Mibe said adjusted operating profit was JPY 1.0393 trillion. He said the motorcycle business delivered record unit sales and operating profit, while the automobile business remained profitable on an adjusted basis despite tariffs, lower unit sales and semiconductor-related supply constraints.
EV Losses Drive Full-Year Deficit
Director, Executive Vice President and Representative Executive Officer Noriya Kaihara said Honda’s consolidated results included a net loss attributable to owners of the parent of JPY 423.9 billion, down JPY 1.2597 trillion from the previous year. Adjusted net profit attributable to owners of the parent was JPY 795.5 billion.
Motorcycle unit sales rose to 22.101 million units, supported by Asia and South America. Automobile unit sales fell to 3.387 million units, mainly due to weakness in Asia, including China. Power products unit sales declined to 3.589 million units.
By segment, Kaihara said motorcycle operating profit rose JPY 68.4 billion to a record JPY 731.9 billion. The automobile business recorded an operating loss of JPY 1.4111 trillion after JPY 1.4536 trillion in EV-related losses. Excluding those losses, automobile adjusted operating profit was JPY 42.5 billion. Financial services generated operating profit of JPY 275.5 billion, while power products and other businesses posted an operating loss of JPY 10.6 billion.
Honda reported free cash flow excluding financial services of JPY 1.58 trillion. Its operating companies had a net cash balance of JPY 3.3245 trillion at the end of March 2026, while operating cash flow after R&D adjustment totaled JPY 2.6579 trillion.
Fiscal 2027 Outlook Calls for Return to Operating Profit
For the fiscal year ending March 2027, Honda forecast operating profit of JPY 500 billion, including an estimated JPY 500 billion in EV-related losses. Excluding those losses, adjusted operating profit is expected to be JPY 1 trillion. Profit attributable to owners of the parent is forecast at JPY 260 billion, or JPY 620 billion on an adjusted basis.
Honda expects motorcycle sales of 22.8 million units, automobile sales of 3.39 million units and power products sales of 3.65 million units. The company assumed an exchange rate of JPY 145 to the U.S. dollar.
The company plans an annual dividend of JPY 70 per share for the fiscal year ending March 2027, unchanged from the prior year. Mibe said Honda has maintained “ample cash at hand” and a high level of financial soundness, citing a 55% equity ratio for operating companies excluding financial services.
Honda Resets EV Strategy and Focuses on Hybrids
Mibe said the cancellation of three North America EV models does not mean Honda is withdrawing from EVs. He said the company will continue EV sales in Japan and Asia where they match local demand and will monitor North American market conditions before launching additional products there.
However, Mibe said the company is withdrawing its previous target for EVs and fuel cell vehicles to account for 100% of sales by 2040. In response to a question from NHK’s Yasunaga, Mibe said that goal is “not realistic as of now” given market uncertainty and changing customer demand. Honda will instead focus on total CO2 reduction while maintaining its goal of carbon neutrality by 2050.
Honda will shift more development and production resources to hybrids. Mibe said the company plans to launch 15 next-generation hybrid models globally by the end of the fiscal year ending March 2030, primarily in North America. The next-generation hybrid system is expected to improve fuel economy by more than 10% and reduce system costs by more than 30% compared with 2023 models.
The company also plans to introduce next-generation advanced driver assistance systems beginning in 2028 and install them in more than 50 models over five years. Honda said it will make all of its North American auto plants capable of producing hybrid models and convert part of the EV battery lines at its LG Energy Solution joint venture to hybrid battery production.
Automobile Turnaround Plan Targets Record Profit
Mibe said Honda’s automobile business faces challenges beyond the EV slowdown, including lower profitability in North America and weaker competitiveness in China and ASEAN markets. He said Honda will focus on improving cost structure, increasing development efficiency and concentrating resources in priority markets.
The company identified North America, Japan and India as priority regions. In Japan, Honda plans to expand EV offerings in the mini-vehicle category and add next-generation hybrid models, mostly SUVs, beginning in 2027. In India, Honda plans to introduce strategic models tailored to local customer needs starting in 2028, including vehicles under four meters and midsize models.
In China, Mibe said Honda will pursue cost reductions through locally sourced standard components, incorporate local technologies such as ADAS and introduce new energy vehicles using platforms from local partners.
Honda also plans what Mibe called “Triple Half,” a development-efficiency initiative aimed at cutting development cost, duration and workload by half compared with 2025 levels. The company aims to reduce minor model change development time by half starting this fiscal year and full model change development time by half for projects starting in 2028.
Honda said it is targeting operating profit above JPY 1.4 trillion by the fiscal year ending March 2029 and a 10% return on invested capital by the fiscal year ending March 2031. Over the next three years, the company plans total investment of JPY 6.2 trillion, including JPY 4.4 trillion for internal combustion engine and hybrid models, about JPY 1 trillion for software and about JPY 0.8 trillion for EV-related investment.
Management Addresses Losses and Governance Changes
In the question-and-answer session, Mibe said he takes the large deficit “very seriously” as management. He said Honda decided to recognize the losses to stop future bleeding and return to a growth trajectory.
Honda also said it will further change its governance structure. Mibe said the board of directors will be composed of a majority of outside directors, the chair of the board will be an outside director, and all members of the nominating and compensation committees will be outside directors.
“The business environment surrounding Honda is uncertain, unprecedentedly uncertain and tough,” Mibe said. He said the company will focus on rebuilding its automotive business while relying on its motorcycle business and financial foundation to support future growth.
About Honda Motor (NYSE:HMC)
Honda Motor Co, Ltd. is a global manufacturer and mobility company headquartered in Minato, Tokyo, Japan, founded in 1948 by Soichiro Honda and Takeo Fujisawa. The company's core businesses include the design, manufacture and sale of automobiles and motorcycles, along with a diverse portfolio of power products, engines and related components. Honda also operates in aviation through Honda Aircraft Company and offers financial services that support vehicle sales and leasing.
In automobiles, Honda is known for a range of passenger cars, crossovers and light trucks, and in motorcycles it is one of the world's leading producers by volume and model breadth.
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