Honda has confirmed it anticipates significant losses for the fiscal year 2025 (April 2025 to March 2026). The scale of the projected losses is substantial: an estimated operating loss ranging between 11.6 billion and 24.7 billion yuan, and a net loss expected to be between 18.2 billion and 29.9 billion yuan.
The company further warned that due to a strategic shift in its electrification plans, it could incur losses as high as 2.5 trillion yen (approximately 108.2 billion yuan) over the next two years. This indicates that losses are expected to continue into the immediate future. This marks the first annual loss for Honda since its listing 69 years ago. Previously, the automaker consistently reported annual profits, typically around $5 billion (approximately 35 billion yuan).
Following the announcement, Honda's U.S.-traded shares experienced a sharp decline of over 8% in pre-market trading.
The primary reasons for this severe downturn are multifaceted. A major factor is the substantial loss stemming from the adjustment of its electrification strategy. While Honda may not be widely perceived as a leader in electrification, the company had in fact pursued an aggressive transition in recent years. It previously planned to cease all sales of internal combustion engine vehicles by 2040 and invested heavily in developing electric models.
However, market realities have delivered a significant setback. Consumer demand in key markets like North America and Europe has not met expectations. North American buyers show a continued preference for traditional vehicles, while in Europe, factors such as lagging charging infrastructure and high electricity costs have limited the adoption of pure electric vehicles. Consequently, Honda's substantial investments have yielded minimal returns. Compounding this, changes to U.S. government electric vehicle subsidy policies forced Honda to cancel the development of three planned electric models for North America, including an SUV, a sedan, and the Acura RSX. Additionally, the development of a pure electric van for the European market was halted. Honda has also drastically reduced its global pure electric vehicle sales target for 2030 from 2 million units to between 700,000 and 750,000 units. These decisions directly led to asset impairment and related losses totaling approximately 2.5 trillion yen.
Another significant factor impacting profitability is international trade policy, specifically tariffs, which have adversely affected Honda's export business for gasoline and hybrid vehicles in key markets.
Finally, Honda's performance in the Chinese market has deteriorated sharply. In 2025, Honda's global sales fell 7.5% to 3.5219 million units. The decline was most pronounced in China, where production and sales dropped by 16.4% and 24.2% respectively, making it the primary contributor to the global downturn. Facing intense competition from domestic Chinese automakers, Honda has struggled to maintain its position. The company is reassessing the recoverable amount of its investments in China and expects to record impairment losses. Honda's sales in China have been declining for several consecutive years, plummeting from a peak of over 1.56 million units in 2021 to just approximately 650,000 units last year—a drop of more than half. Models that were once top sellers have now fallen out of the top ten rankings.
The recent news that the once-popular Honda Fit sold only three units nationwide in a single month surprised many. By February of this year, production of the Fit was discontinued altogether. Similarly, Dongfeng Honda, which previously relied on strong sellers like the Civic and the CR-V, has seen its fortunes decline dramatically. From annual sales of 820,400 units in 2020, Dongfeng Honda's sales fell to 325,800 units in 2025. Its recently launched electric models in China, such as the e:NS1 and the S7, have failed to gain any significant market traction.
The era when Honda could succeed based primarily on a reputation for fuel efficiency and reliability is over. Consumer preferences have shifted decisively toward features like advanced in-car entertainment, comfort amenities, and smart technology. The decline of this former "dominant force" in the automotive industry serves as a stark reminder of how rapidly market dynamics can change.
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