By Sean McLain and Patrick George
Honda Motor managed to stay profitable through a global financial meltdown, natural disasters, a safety crisis and the pandemic. Then came America's electric-vehicle whiplash.
The Japanese company, the fifth-largest automaker in the U.S. by sales, is confronting some of the steepest challenges it has faced in its nearly seven decades as a public company. U.S. tariffs have squeezed profits in its biggest market. Chinese upstarts provide a new threat. Above all, its electric vehicle ambitions in North America have collapsed.
Due to $10 billion in losses from scrapping the EV plans, Honda reported on Thursday its first annual loss as a listed company, some $2.7 billion.
"We have to try to stop the bleeding as soon as possible," Chief Executive Toshihiro Mibe said.
Honda is among several large, legacy automakers that have struggled navigating a topsy-turvy North American market. While renowned for its engineering expertise, it has fallen behind Chinese rivals in the automotive technology race.
The company's problems collided with a big bet on electric vehicles. The expense of developing EV technology needed to compete with Tesla and Chinese automakers required a bet-the-farm level of investment. Now that the bet has gone sideways, Honda is left in its worst financial situation since the company's birth.
Unlike many other automakers that dialed back their electric investments or canceled future EV models, Honda sank billions into cars it will never put on the road. The move also leaves Honda with very few EVs to sell around the world, causing it to lose ground to Chinese and South Korean competitors.
Honda's once-ambitious plans were built around Biden-era regulations in the U.S., where the company sells most of its cars. Those policies would have pushed for a mostly electric new car market by the next decade. But President Trump's reversal of what he decried as an "EV mandate" meant that automakers like Honda are under no such pressure.
Honda executives had expected EVs to account for roughly 15% of new vehicle sales in the U.S. Today, the figure is closer to 6%.
"If we were to go ahead with this, we knew that in the future, we will generate losses," Mibe said.
The canceled projects include three new EV models once meant to be built in Ohio and an $11 billion complex in Canada that would have included the manufacturing of EVs, batteries and materials. Honda will also give up on a plan to end internal combustion engines by 2040.
Mibe said Honda will instead pivot to a more familiar technology in the form of hybrid cars, starting with a new sedan and SUV aimed at North America in 2027. More than a dozen hybrid models will follow globally by 2030.
Mibe said he aimed to return Honda to profitability in the current fiscal year, despite anticipating additional EV-related write-downs.
He also indicated that Honda will partly be playing defense. Mibe wants to insulate Honda from being buffeted by changing policies in the U.S., while increasing spending on gasoline vehicles.
Yet the automaker has to keep up with the cutting-edge developments coming out of Tesla and Chinese upstarts. Mibe said Honda would up spending on software and put EV and battery technology into new hybrids, which could allow Honda to produce fully-electric models whenever American car buyers' tastes changed.
Honda grew into a worldwide automotive colossus from humble roots. Initially a seller of motorcycles and scooters, its reliable, fuel-efficient vehicles upset Detroit's gas-guzzlers in the 1970s and '80s and attracted a devoted customer base.
Honda continued its string of automotive breakthroughs over the decades, even beating hybrid giant Toyota to the U.S. market with one in 1999.
Yet more recently, Honda has gone from innovator to laggard on EVs and autonomous-driving technology. Early stumbles with homegrown electric models and self-driving technology led Honda to decide that it had to bet more aggressively on the future of automobiles, at the expense of its current lineup.
In order to spend billions of dollars on new EVs, Honda had to pull back on its gasoline engine business, historically the source of the company's strength as an automaker.
Now to reclaim its advantage, Mibe plans to lean further on shifting Honda from its insular heritage developing engines and cars in-house. It had sought to partner with other automakers like General Motors to accelerate a transition to EVs.
The first EV born of the Honda-GM partnership, the Prologue SUV, was based on the Detroit carmaker's tech, not Honda's. The Prologue was the sixth-best selling EV in 2025, but sales have since fallen sharply, according to Motor Intelligence. Sales in the first four months of this year were less than half the same period last year.
Still, Honda's EV plans were locked in. The company had finalized designs and had ordered expensive manufacturing equipment to build the new models. It even invited journalists to Japan to test "prototypes," a sign of how far along the program was.
Now, Mibe said that Honda would lean more on EV technology developed by "local partners" in China to better compete in that market. He also said he aimed to return Honda to profitability in the current fiscal year, despite anticipating additional EV-related write-downs.
"Rather than just focusing on EVs, we want to be flexible whether we need to head towards EVs or in the other direction," Mibe said.
Write to Sean McLain at sean.mclain@wsj.com and Patrick George at patrick.george@wsj.com
(END) Dow Jones Newswires
May 14, 2026 20:00 ET (00:00 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
Comments