Key Takeaways
Honda Motor Co. (NYSE: HMC) reported a full-year operating loss of ¥414.3 billion after booking ¥1.58 trillion in charges related to a broad reset of its electric vehicle strategy.
"The business environment surrounding Honda is uncertain, unprecedentedly uncertain and tough," Director, President and Representative Executive Officer Toshihiro Mibe said, adding that the company decided to recognize the losses to stop future bleeding and return to a growth trajectory.
The massive EV-related charges drove the Japanese automaker to a net loss of ¥423.9 billion for the fiscal year ended March 31. Excluding the charges, adjusted operating profit was ¥1.0393 trillion, supported by record profit in its motorcycle business. The company maintained its annual dividend at ¥70 per share.
In a major pivot, Honda is scrapping its previous target for EVs and fuel cell vehicles to account for 100% of sales by 2040, a goal Mibe called "not realistic as of now." The company will instead funnel resources toward hybrids, planning 15 new models by 2030.
Honda's turnaround plan now centers on hybrid technology, which is currently in higher demand, particularly in its priority market of North America. The company aims to reduce the cost of its next-generation hybrid systems by more than 30% while improving fuel economy by over 10% compared to 2023 models. As part of the shift, Honda will retool a portion of its EV battery joint venture with LG Energy Solution to produce hybrid batteries instead.
Despite the significant loss, management outlined a path back to profitability. For the fiscal year ending March 2027, Honda forecasts an operating profit of ¥500 billion. The company is targeting a record operating profit exceeding ¥1.4 trillion by the fiscal year ending March 2029 and a 10% return on invested capital by fiscal 2031. Total investment over the next three years is planned at ¥6.2 trillion, with the largest portion, ¥4.4 trillion, allocated to internal combustion engine and hybrid models.
The strategic reset follows the cancellation of several planned EV models for North America, a decision made in response to unfavorable US tariffs and declining competitiveness. The company's motorcycle division, a market leader in Asia, remains a key source of strength, with unit sales rising to 22.1 million.
The guidance for the upcoming fiscal year signals management's confidence that the bulk of EV-related losses are now accounted for. Investors will watch the rollout of new hybrid models beginning in 2027 to see if the strategic pivot can restore the automotive division's profitability.
This article is for informational purposes only and does not constitute investment advice.
