Honda Experiences Profit Decline Amid Market Challenges

Honda’s profit shrank by 42% from April to December 2025, largely due to U.S. tariffs and write-downs on electric vehicle (EV) assets. The automaker reported a net profit of 465.44 billion yen (approximately $2.99 billion) for the nine-month period ending in December. Despite these struggles, Honda has decided to stick to its annual profit forecast, showing some confidence that it can navigate through current difficulties.

The drop in profit can be attributed primarily to a temporary provision and impairment loss totaling 267.1 billion yen. These charges stemmed from EVs sold in the U.S. and adjustments on development assets due to a shift in the company’s vehicle lineup strategy.

This impairment signifies a significant strategic pivot for Honda regarding electric vehicles. In May, Honda revealed plans to reduce its EV investments by about $20 billion over the next few years, pointing to a slower-than-anticipated rise in demand for electric vehicles.

In a previous report, it was noted that Honda intends to prioritize hybrid vehicles over fully electric ones. Recently, the company announced that it would not achieve its earlier target of having 30% of its car sales come from electric vehicles by 2030. CEO Toshihiro Mibe indicated that given the current market conditions, expected EV sales for 2030 would likely fall below that 30% goal. He mentioned that EVs might make up about 20% of sales instead.

In addition to tariffs and related costs concerning EVs, Honda also had to contend with operational disruptions in North America. Late last year, manufacturing faced challenges from a shortage of semiconductor chips supplied by Neexperia, a Dutch company. This shortage arose amid geopolitical tensions between the Netherlands and China, emphasizing how vulnerable the global auto supply chains can be to such conflicts.