Honda is recalibrating its electric vehicle (EV) strategy after reporting four consecutive quarterly losses in its automotive division. Despite overall profitability driven by its motorcycle and financial services businesses, the car division remains in the red, prompting a shift away from aggressive EV expansion.
Financial Strain and Strategic Reassessment
For the nine months ending December 2025, Honda’s automotive division recorded an operating loss of ¥166.4 billion (A$1.5 billion), exacerbated by ¥267.1 billion (A$2.5 billion) in charges related to US tariffs and initial EV investments. This financial pressure is forcing Honda to adjust its long-term roadmap toward carbon neutrality by 2050.
According to Noriya Kaihara, an executive vice president at Honda, the company is “carefully reassessing the timing of EV introductions” based on shifting market realities. This means a more conservative rollout, particularly in regions where EV demand is faltering.
US Market Downturn and ICE Focus
The end of the US$7500 federal EV tax rebate in September 2025 has triggered a significant decline in US electric car sales. Honda anticipates this slump will continue, leading the automaker to prioritize internal combustion engine (ICE) and hybrid electric vehicle (HEV) models in the near term. The company is even prepared to compensate General Motors (GM) with ¥20 billion (A$180 million) for lower-than-expected orders of the Prologue, the EV currently co-produced with GM, while acknowledging that this sum may not be enough. GM-supplied Acura ZDX has already been canceled due to weak demand.
Adapting to the Chinese Market
Honda recognizes its lagging competitiveness in the Chinese EV market, particularly in software and interior technologies. The company is abandoning its previously independent approach in favor of deeper integration with local suppliers. This pivot reflects a broader recognition that successful EV expansion in China requires collaboration with established domestic players.
Unlike competitors Toyota, Nissan, and Mazda, Honda has resisted leveraging joint venture partnerships for EV architecture and technologies. It remains to be seen if this stance will change, but Kaihara emphasized a laser focus on cost reduction. The lessons learned in China will then be applied to other Asian markets.
Honda’s shift reflects the harsh realities of the EV transition, where profitability is not guaranteed, and regional adaptation is critical for success. The automaker’s decision to prioritize ICE/HEV models in key markets signals a pragmatic retreat from overly ambitious EV goals.
