Honda Cuts EV Plans, Takes Up to US$15.7 Billion Hit

Honda announced it will cancel the development and launch of three electric vehicle models planned for production in North America and record up to ¥2.5 trillion ( US$15.7 billion) in charges tied to a broader restructuring of its electrification strategy. The move comes as the company reassesses its investment plans amid slower-than-expected demand for battery-electric vehicles in the United States and rising competitive pressure in China.

The decision is expected to lead the automaker to record its first annual net loss since becoming publicly traded in the 1950s, according to company projections for the fiscal year ending this month.

Honda confirmed it will discontinue development of the Honda 0 SUV, Honda 0 Saloon and Acura RSX electric models, which had been planned for production in the United States as part of its long-term electrification strategy.

“The automotive business fell into an extremely difficult earnings situation due to various factors, including our inability to respond flexibly to changes in the business environment,” the company said in a statement explaining the strategic revision.

The financial impact includes several categories of losses and impairments. Honda expects to record between US$5.15 billion to US$7 billion in operating expenses related to the review of its electrification strategy during fiscal year 2026. These charges are tied primarily to development, commercialization and related costs associated with the canceled electric models.

Additional losses include approximately US$942 million linked to investment impairments, mainly associated with operations in China.

Honda also expects to report extraordinary losses of about US$3.58 billion in its standalone financial results.

Combined, these charges contribute to an estimated total impact of ¥2.5 trillion (US$15.7 billion) tied to the restructuring of the EV program and related asset write-downs.

As a result, the automaker now projects a net loss of between ¥360 billion (US$2.3 billion) and ¥630 billion (US$4.0 billion) for the fiscal year ending this month, compared with its previous forecast of a ¥360 billion (US$2.3 billion) profit.

If confirmed, the loss would mark the company’s first annual net deficit in nearly seven decades.

US EV Market Growth Slows

Honda’s strategic reassessment reflects broader shifts in the US electric vehicle market, where growth has slowed compared with earlier projections.

“Demand for electric vehicles in the United States is less than half of what we expected,” said Toshihiro Mibe, President, Honda.

The slowdown in EV adoption has been attributed to several factors, including regulatory changes and adjustments to subsidies that had previously supported faster expansion of battery-electric vehicle sales.

These developments have prompted automakers to reassess production timelines, investment levels and product strategies for electric vehicles in the region.

Honda had previously been among the most aggressive Japanese manufacturers in promoting battery-electric vehicles, setting a target to sell only battery-electric and fuel-cell vehicles by 2040.

However, the company now plans to adopt a more flexible approach to electrification, aligning investments more closely with evolving market demand.

Pivot Toward Hybrid Vehicles

As part of its revised strategy, Honda will increase its focus on hybrid vehicles, particularly in key markets including Japan, the United States and India.

The company said hybrids will play a larger role in its near-term product portfolio, while the transition to fully electric vehicles unfolds over a longer time horizon.

Honda emphasized that the shift does not represent a reversal of its electrification goals but rather an adjustment to the pace of investment and product rollout.

Competitive Pressures in China

In addition to challenges in the US market, Honda acknowledged difficulties in China, where domestic EV manufacturers have rapidly advanced in areas such as product development and software capabilities.

The company said it has struggled to match the technological pace and pricing competitiveness of newer electric vehicle makers in the Chinese market.

“Honda was unable to offer products with better value for money than newer electric vehicle manufacturers, which resulted in a loss of competitiveness,” the company said.

These challenges contributed to the impairment charges tied to Honda’s operations in China.

Overall, the restructuring reflects not only adjustments to US demand but also broader competitive pressures across the global EV market.