Honda’s once reliable car profits have been hammered by a costly bet on electric vehicles that is now forcing a sweeping rethink of its strategy. The automaker has racked up heavy impairments on EV assets, dragging its core auto division into repeated losses even as motorcycles and other businesses remain solid. The result is a stark warning to legacy carmakers about how quickly the economics of the EV transition can turn.
The company is now confronting a painful reality: the capital it poured into new platforms, batteries, and future models is not earning the returns it expected, at least not on the original timetable. Instead of powering growth, those investments have produced four straight quarters of operating losses in the auto unit and a collapse in quarterly profit that has shaken confidence in Honda’s roadmap.
Profits plunge as EV write-offs swell
The headline number that crystallizes Honda’s predicament is the more than 60% year on year slump in third quarter operating profit, a drop executives directly linked to restructuring in its EV business. Japan’s second biggest automaker reported operating profit of 153.4 billion yen, or $987.07 million, for the October to December period, down 61.4% from a year earlier. That collapse came even though the broader group still generated healthy earnings over nine months, underscoring how sharply the car business has deteriorated.
Behind that slump sits a wave of impairments and restructuring charges tied to EVs. According to Key Takeaways from Honda’s latest results, the company’s EV write offs reached $1.71 billion in the nine months through December, a figure that captures both canceled projects and downgraded expectations for future EV demand. Over the same period, the auto unit notched four straight quarters of operating losses, even as group operating profit for the nine months still came in at 591.5 billion yen, highlighting how motorcycles and financial services are now propping up a struggling car arm.
Auto unit in the red while other divisions carry the load
The most jarring shift for Honda is that its core car business, long the company’s profit engine, has become a drag on the wider group. Honda Motor Co’s auto unit has now posted four consecutive quarters of operating losses, a losing streak that reflects both the direct hit from EV impairments and the broader cost of retooling factories and supply chains. Over the same stretch, the company reported a cumulative operating loss of 166.4 billion yen in its auto operations, even as the wider group remained profitable.
Other divisions are now doing the heavy lifting. For the nine months ended December 31, 2025, Quarterly Performance Highlights show that record motorcycle sales and solid financial services earnings offset the auto segment losses. That mix has allowed Honda to maintain its full year profit forecast, but it also exposes a structural imbalance: the company is leaning on two wheeler demand in emerging markets to cushion the blow from EV missteps in North America, China and other key car markets.
Tariffs, politics and a tougher global EV market
Honda’s EV problems are not unfolding in a vacuum. The company is also grappling with shifting trade policy and a more crowded global EV landscape that is squeezing margins. In the United States, President Trump Extends Tariff to August 1, Leaving Automakers in Limbo, a move that has delayed but not removed the threat of higher import duties on vehicles and components. Honda’s management has acknowledged that U.S. tariffs are adding to the pressure on its EV plans, with one analysis noting that Honda’s Q3 profit fell 61% to ¥153. Executives have also stressed that HONDA’s EV CHALLENGES EXTEND BEYOND NORTH America, pointing to additional EV related costs in China, where local competition is intense and price cuts are eroding profitability.
Political risk is now a central part of the story. Reporting on how Trump’s tariffs and EV moves are hurting the Japanese automaker’s results notes that this is the second straight year profit has declined in the period, even as the company’s motorcycle division worked as a plus. Another account by Yuri Kageyama underlines that Honda, the maker of the Accord sedan and Civic compact, is being squeezed between policy shifts in Washington and a rapidly changing EV market. For a company that built its brand on affordable, efficient cars, the combination of tariff uncertainty and heavy EV spending is particularly destabilizing.
Strategic reset: canceled SUV and global EV rethink
Faced with mounting losses, Honda is now tearing up parts of its EV product plan. One of the most striking moves is the decision by Honda Motor to cancel development of a large electric SUV that had been targeted for a 2027 release, citing declining EV demand and a reassessment of where to allocate capital. That SUV was meant to anchor Honda’s push into higher margin electric family vehicles in North America, so its cancellation signals a more cautious approach to volume and pricing in a segment now crowded with rivals. The company has also been reviewing joint projects, including efforts to share EV costs with General Motors, as it looks for ways to reduce the financial burden of the transition.
At the same time, Honda is signaling that it will not abandon EVs, but will instead overhaul how and where it competes. Executives have said the company needs to rethink its electric vehicle strategy in major markets like the U.S., a point underscored in analysis by Kosaku Narioka. The company’s own Honda Motor Co filings describe a strategic review that spans product planning, regional focus and partnerships, with an eye to cutting EV costs and aligning launches more closely with actual consumer demand rather than optimistic forecasts.
What the numbers say about Honda’s next chapter
For investors and rivals, the detailed figures offer a roadmap of where Honda is likely to go next. The company has already booked a $1.7B EV restructure charge and acknowledged that its EV write offs have reached $1.71 billion, numbers that effectively reset the book value of its early EV bets. Honda’s Q3 profit fell 61% to ¥153.4B due to EV losses and U.S. tariffs, according to MEXC News, while another Honda briefing framed the same period as a more than 60% drop in third quarter operating profit. Those data points suggest that management has now taken much of the financial pain upfront, clearing the way for a more disciplined second phase of its EV rollout.
Yet the company’s own history is a reminder that turnarounds are not guaranteed. Honda, the Accord and Civic maker that once set the benchmark for reliable combustion engines, is now racing to catch up in a segment where newer players and aggressive Chinese brands have a head start. As Japanese analysts have noted, the EV market was changing even as Honda locked in some of its biggest investments, leaving it exposed when demand cooled and tariffs loomed. The company’s willingness to cancel a flagship SUV, absorb multi billion dollar write offs and publicly commit to an overhaul suggests it understands the scale of the challenge. Whether that is enough to restore its car profits to former strength will depend on how quickly it can translate this painful reset into EVs that customers actually want to buy at prices that make sense.
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*This article was researched with the help of AI, with human editors creating the final content.
Grant Mercer covers market dynamics, business trends, and the economic forces driving growth across industries. His analysis connects macro movements with real-world implications for investors, entrepreneurs, and professionals. Through his work at The Daily Overview, Grant helps readers understand how markets function and where opportunities may emerge.
