¥1.45 trillion. Roughly $10 billion. That is what Honda’s bet on an all-electric future just cost the company — and it produced the first annual loss in the Japanese automaker’s 69-year history as a publicly traded company.

Honda reported an operating loss of ¥414.3 billion ($2.7 billion) for the fiscal year ending March 2026, according to earnings released Thursday. The result was worse than the ¥315.6 billion loss analysts expected in an LSEG poll, and a stark reversal from the ¥1.2 trillion profit posted a year earlier.

The culprit was not a mystery. Honda booked ¥1.45 trillion in total EV-related losses for the year — canceled product plans, abandoned partnerships, and a comprehensive restructuring of its electric vehicle strategy. Another ¥500 billion in related costs are expected in the current fiscal year.

Dismantling the All-Electric Pledge

CEO Toshihiro Mibe used the company’s annual business briefing to announce what amounts to a strategic surrender on the timeline Honda once championed. The automaker scrapped its 2021 pledge to transition all vehicles to electric or fuel-cell power by 2040. Three EV models slated for the US market — an SUV, a sedan, and an Acura luxury vehicle — were canceled outright, according to CBT News. The Sony-Honda joint venture will not sell EVs as planned. A comprehensive Canadian EV value chain project, spanning batteries to materials production, was indefinitely suspended.

In their place: hybrids, and lots of them. Honda will reallocate development resources toward gasoline-electric models and plans to launch 15 next-generation hybrid vehicles globally by the end of March 2030, primarily in North America. The company presented prototypes of two of them — a hybrid sedan and an Acura hybrid SUV — at the briefing, both scheduled to go on sale within two years. Honda will convert part of its EV battery production lines at the L-H Battery Company joint venture with LG Energy Solution to hybrid battery manufacturing instead. Ohio auto plants will shift excess capacity to gasoline and hybrid production.

The capital allocation tells the story. Over the next three years, Honda plans to invest ¥4.4 trillion ($30 billion) in gasoline and hybrid vehicles, ¥1 trillion in software technologies, and just ¥0.8 trillion in EVs — a fraction of what it had previously committed.

A Miscalculation, Not a Rejection

Honda’s retreat does not mean electric vehicles have failed. It means one of the world’s largest automakers badly misjudged how quickly consumers would adopt them — and how much it would cost to force the pace.

Slowing global EV demand, rising material costs, US tariff pressures, and a collapsing China business all converged. Honda’s sales in China have fallen more than 50% over the past five years as domestic competitors, many backed by heavy state subsidies, captured market share with cheaper electric models. Rising material prices, including knock-on effects from the Middle East conflict, are expected to shave another ¥313 billion off operating profit in the current fiscal year.

Mibe said management is taking the losses seriously and working to build a more resilient business structure, according to CBT News.

Honda is hardly alone in its reckoning. General Motors and Ford have both reported EV-related writedowns while pivoting toward hybrid and gasoline-powered profitability.

Motorcycles to the Rescue

While the auto business bled, Honda’s motorcycle division delivered record-high sales volume and operating profit, driven by strength in India and Brazil. The company plans to expand annual motorcycle production capacity in India from 6.25 million to 8 million units by 2028, targeting record global sales of 22.8 million units.

Honda expects to return to profitability this fiscal year, forecasting a ¥500 billion operating profit, with the motorcycle business cushioning the ongoing restructuring. By fiscal 2029, the company targets consolidated operating profit exceeding ¥1.4 trillion — an all-time high — with EV-related losses fully resolved.

The shares tell a more cautious story. Honda stock has fallen 14% year to date as investors weigh tariff uncertainty, geopolitical risk, and the long road back from the writedown.

Honda insists it has not abandoned carbon neutrality, maintaining a 2050 target. But the path now runs through hybrid engines and cost-cutting — not the all-electric future it promised just five years ago.

Sources