The company said the large write-down reflects weakening demand for electric vehicles and the cancellation of several EV projects planned for production in the United States.
Honda disclosed that it would record a charge of as much as 2.5 trillion yen ($15.7 billion) after scrapping three EV models that had been scheduled for production in the U.S. The decision represents a significant shift in strategy as global automakers reassess their electric vehicle investments amid changing market conditions.
Changing Policy Landscape Adds Pressure
The slowdown in EV demand has been compounded by policy changes in the United States under Donald Trump, whose administration ended government support for electric vehicles. The policy shift has forced major automakers to rethink their EV strategies and record major financial write-downs.
Industry giants such as Ford Motor Company and Stellantis have also reported significant losses linked to scaled-back EV programmes.
Honda’s decision to cancel its U.S. EV production plans came as a surprise to analysts who had anticipated some losses but not the complete withdrawal from the programme.
Julie Boote, an automotive analyst at Pelham Smithers Associates, said the scale of the restructuring exceeded expectations.
“The main surprise was that the U.S. production programme was cancelled rather than just scaled down,” Boote said, noting that Honda had previously pursued an ambitious EV expansion strategy that has been undermined by changing market conditions.
Weak Demand Hits Profitability
Honda’s Chief Executive Officer Toshihiro Mibe acknowledged that slowing demand for electric vehicles had made it increasingly difficult to maintain profitability in the segment.
Speaking at a press conference, Mibe said the company had been forced to reconsider the pace of its EV transition.
In addition to scaling back its EV plans, Honda is also writing down the value of its operations in China, where the company has struggled to compete with technologically advanced local manufacturers such as BYD.
Chinese carmakers have rapidly expanded their presence with software-driven vehicles and competitive pricing, placing growing pressure on foreign brands.
First Loss Since 1957 Listing
Honda now expects to record a net loss of up to 570 billion yen (about $3.6 billion) for the fiscal year ending in March, a sharp reversal from its earlier forecast of a 550 billion yen profit.
If confirmed, the result would mark the company’s first annual loss since it listed on the stock market nearly seven decades ago.
Following the announcement, Honda’s U.S.-listed shares fell around eight percent in premarket trading.
Industry-Wide EV Write-Downs
Honda’s restructuring charge adds to a growing wave of losses across the global automotive industry as companies scale back electric vehicle ambitions.
According to industry estimates, automakers have collectively recorded about $67 billion in EV-related write-downs. General Motors has warned of a potential $7.6 billion hit, while Stellantis and Ford have flagged losses of about $25 billion and $19 billion respectively.
The shift highlights the growing challenges automakers face as the pace of EV adoption slows in several major markets.
India Emerging as Key Growth Market
As part of its revised strategy, Honda said it plans to strengthen its presence in India, where the company sees strong potential for growth.
Japanese automakers have increasingly turned to India as competition from Chinese manufacturers intensifies across Asia and other regions. Unlike many global markets, Chinese carmakers have limited access to both the Indian and U.S. automotive markets, providing opportunities for Japanese brands to expand.
Executive Pay Cuts Announced
In response to the financial setback, Honda’s leadership announced temporary compensation reductions. CEO Toshihiro Mibe and Executive Vice President Noriya Kaihara will voluntarily forgo 30 percent of their pay for three months, while several other executives will accept a 20 percent reduction.
The company said it will unveil a revised medium- to long-term business strategy in the next fiscal year as it adjusts to evolving market conditions and reassesses its approach to electrification.