Honda Earnings Slide 61% as Tariffs Bite

Honda Motor posted a steep decline in third-quarter operating profit, highlighting mounting financial pressure from US tariffs and restructuring costs tied to its electric vehicle (EV) strategy as EV demand softened in several major markets. Japan’s second-largest automaker reported operating profit of US$987.1 million for the October–December quarter, down 61.4% year over year and below the US$1.12 billion average estimate compiled by LSEG. 

Honda attributed the shortfall to weaker EV demand in North America, asset write-downs related to EV investments, and the impact of US tariffs. “Our current challenge is to build a lean operating structure that can respond flexibly to changes in the business environment,” Executive Vice President Noriya Kaihara said at an earnings briefing.

For the nine months ended December, Honda said the North American EV market “turned sharply negative” as incentives declined and consumers shifted toward lower-priced vehicles and gasoline-electric hybrids. That slowdown reduced operating profit by nearly US$1.74 billion during the period. US tariffs cut profit by an additional US$1.80 billion, the company said. The United States remained Honda’s largest market, accounting for more than two-fifths of global sales over the nine-month span. Honda said the combined effects of tariffs and EV restructuring costs pushed its automobile business into a loss during that period.

Honda’s results reflect broader pressures facing global automakers as they reassess electric vehicle investments amid slower-than-expected adoption. Several manufacturers have announced significant write-downs as they scale back EV expansion plans. Stellantis said it would take charges of US$26.5 billion, while Ford and General Motors have also disclosed substantial EV-related writedowns in recent quarters. 

Honda said its EV-related challenges extend beyond North America. Executives acknowledged costs associated with EV operations in China, the world’s largest auto market and Honda’s second-largest by sales, where competition has intensified sharply. “Honda is lagging local players in China in terms of pricing and software,” Kaihara said, adding that the company requires a “fundamental restructuring” of its strategy to regain competitiveness. Sales in China have struggled for several years as domestic manufacturers expanded offerings and accelerated electrification.

By contrast, Honda’s motorcycle business continued to perform steadily, with global sales led by India and Brazil. The segment helped offset weakness in the automobile division during the period.

While fourth-quarter EV sales declines have drawn attention, full-year 2025 data presents a more nuanced picture. Total US EV sales for the calendar year came in just below the 1.30 million units recorded in 2024, supported by record third-quarter volume. According to Kelley Blue Book estimates, 2025 was the second-best year on record for EV sales in the United States. EVs accounted for 7.8% of total light-vehicle sales, down slightly from 8.1% a year earlier. Despite the EV-related headwinds, Honda maintained its operating profit forecast of US$3.54 billion for the fiscal year ending March 2026. 

Globally, EV sales rose 20% in 2025 to 20.7 million vehicles. Europe recorded the fastest growth rate among major regions, while China remained the largest EV market by volume. In contrast, U.S. EV sales increased by just 1% year over year. Analysts attributed the muted growth primarily to policy-related headwinds, including the elimination of the federal EV tax credit and other regulatory changes that reduced consumer incentives and dampened demand.

North America’s slower adoption has carried significant financial consequences for automakers. Major manufacturers have recorded approximately US$55 billion in EV-related write-downs after overestimating demand, according to Reuters.