Honda Posts First Annual Loss in 70 Years on EV Investment Shortfall

Honda recorded its first annual loss in 70 years after investments in the electric vehicle market failed to deliver results.

Demand for EVs did not meet the company's expectations. Honda posted a total operating loss of ¥423 billion ($2.68 billion; £1.99 billion) for the year ending March 2026.

The company plans to drop some EV production targets and source parts from China, where prices are lower, to cut costs. It pointed to US policy changes as a factor in the losses, including the removal of tax incentives for US consumers buying EVs and new tariffs.

US buyers once qualified for up to $7,500 (£5,500) in tax credits on new EVs, but President Donald Trump ended the program in September 2025. His 2025 tariffs on imported cars and parts, cut from 25% to 15%, still hurt profits at major automakers.

Listed on the stock market since 1957, Honda ranks as Japan's second-largest carmaker. Analysts noted its size and established operations make it hard to adjust to sudden shifts in EV demand.

Honda now aims to expand its motorcycle business, financial services and hybrid vehicle production. It named North America, Japan and India as priority markets for growth, though it halted plans for EV and battery plants in Canada.

Chief executive Toshihiro Mibe said Honda would abandon its goal of EVs making up one-fifth of new car sales by 2030. He added the company also dropped its target for an all-EV fleet by 2040.

Honda forecasts ¥512 billion in EV-related losses for the 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 politics, living costs and Chinese competition prompted Honda to abandon EV plans and absorb the expenses. Hewson noted that even with recent EV demand increases from higher petrol prices tied to the US-Israel war with Iran, "companies like Honda are having to adapt on the fly which is tough for businesses of this scale."