This one’s a biggie. Honda has just posted its first annual loss since becoming a publicly traded company back in 1957. And it’s not a small number either – Honda reported a staggering net loss of US$2.7 billion for the fiscal year ending March 31.
That’s a dramatic reversal when compared to the company’s profit of more than $7.5 billion the previous fiscal year. So what went wrong?
A major bet on electrification simply didn’t pay off the way the Japanese giant had hoped. Speaking at a press conference on May 14, Honda CEO Toshihiro Mibe discussed how dramatically the EV market has changed for both consumers and businesses. He acknowledged that although Honda attempted to respond, it failed to do so quickly enough.
According to Mibe, the company is now abandoning both its goal of fully transitioning to electric and fuel-cell vehicle sales by 2040 and its target of EVs accounting for one-fifth of all new-car sales by 2030. Not only that, Honda’s $10.4-billion investment plan to manufacture EVs and batteries in Canada has now been put on hold indefinitely.
Honda also admitted that changes in US policy, including the removal of tax incentives for EV buyers and the introduction of tariffs, were major contributing factors behind the losses.
That led to a sharp decline in Honda’s EV sales. In the final quarter of 2025, the company sold only around 15,000 EVs globally. In the United States alone, sales of the Honda Prologue reportedly fell by as much as 86%.
Then again, Honda is hardly alone in this struggle. Automakers across the board are dealing with sluggish EV sales despite rising gasoline prices in 2026. But credit where it’s due: Honda has been quick to act by pivoting harder toward hybrid technology, with ambitious plans to launch 15 new hybrid models by 2030.
And despite the sea of red ink, Honda’s stock has actually risen substantially over the past few days. Shares climbed 7% on May 15 alone. Why? There are several reasons.
For one, investors were buying into the next 12 months rather than reacting purely to the past year’s results. Secondly, the market appears far more interested in Honda’s projected operating profit of $3.14 billion for the coming year than Bloomberg’s consensus estimate of $1.3 billion.
And perhaps most importantly, Honda had already warned investors back in March that it expected to incur up to $15.7 billion in EV-related expenses. In that sense, the market reaction wasn’t quite as paradoxical as it first appeared. Much of the shock had already been priced in when the earlier warning was issued. This latest report simply confirmed the scale of the write-down and demonstrated that the damage was concentrated around one major strategic gamble.
What makes Honda’s first annual loss in nearly 70 years so significant isn’t just the number itself – it’s what Honda has historically represented within the automotive world. This is a company that built its reputation on engineering discipline, financial caution, and an almost irritating level of consistency.
Honda wasn’t supposed to be the company making panic pivots or swallowing multi-billion-dollar write-downs while chasing the EV transition. And yet here we are: one of the industry’s most methodical manufacturers suddenly looking just as vulnerable and uncertain as everyone else.
Still, it’s not all doom and gloom. Honda expects to return to profitability this year, banking on cost-cutting measures and the continued strength of its motorcycle business to help stabilize the company. "The motorcycle business will expand production capacity in India ... and aim for record-high sales of 22.8 million units," Honda said in its earnings statement.
But this story is bigger than Honda alone. For years, the global automotive industry treated electrification as an inevitable straight road into the future. Massive EV investments, factory expansions, and aggressive deadlines were all built around the assumption that consumer demand would rise in lockstep with corporate ambition.
Honda’s loss is a reminder that the transition is turning out to be far messier than the PowerPoint presentations promised. Legacy automakers now find themselves trapped in perhaps the worst possible middle ground: too deep into EV spending to retreat cleanly, yet not far enough ahead to dominate the market the way Tesla or China’s BYD already do.
But if you ask me, there’s something symbolic about Honda being the company to blink first. Because if even Honda – with its global scale, motorcycle profits, and famously conservative management – can stumble this hard, it sends a deeply uncomfortable message about the state of the industry overall.
Honda’s loss isn’t just a bad financial year. It feels like the first real crack in the illusion that the industry had this transition fully figured out.
Source: Honda
