Honda Motor, Japan's second-largest automaker, has posted its first annual loss in nearly 70 years due to restructuring costs in its electric-vehicle business. The company has scrapped its long-term EV sales targets and indefinitely suspended its Canada EV project.
Honda Motor 's CEO and President, Toshihiro Mibe attends a media briefing about financial results in Tokyo, Japan on May 14. TOKYO — Honda Motor posted its first annual loss in nearly 70 years as a listed company on Thursday , hit by more than US$9 billion in costs to restructure its electric-vehicle business , and the firm scrapped its long-term EV sales target.
Revealing its worst financial report since Honda listed on the stock market in 1957 underscores how risky an aggressive bet on EVs can be for a legacy automaker when it slams into weaker-than-expected demand. Toshihiro Mibe, CEO of Japan's second-largest automaker, on Thursday said Honda is scrapping its goal of having EVs make up a fifth of its new car sales in 2030 as well as a target of a full shift to electric or fuel-cell vehicle sales by 2040.
Mibe said Honda will also indefinitely suspend its Canada EV project, an US$11 billion investment plan to produce EVs and batteries in what would have been the Japanese firm's largest ever investment in the country. Honda's shares briefly hit a two-month high before closing up 3.8 per cent on Thursday, after it pledged at least 800 billion yen in shareholder returns over three years and kept the annual dividend for both the new fiscal year and the year just ended at 70 yen per share.
The pledge highlights Honda's reliance on its profitable motorcycle business to generate cash and support shareholder returns, as its auto operation continues to lag in terms of scale and execution. Some steps the company laid out as part of its strategy, such as using more local components from China, were "nothing new," he said.
Its operating loss totalled 414.3 billion yen for the year ended March, compared with a median estimate of a 315.6 billion yen loss in a poll of 22 analysts by LSEG and a 1.2 trillion yen profit a year earlier. Honda booked total EV-related losses of 1.45 trillion yen for the business year ended March and expects to face additional costs of 500 billion yen for the year just started.
The company still expects to return to profitability this year, forecasting a 500 billion yen profit on cost-reduction measures and its profitable motorcycle business.
"The motorcycle business will expand production capacity in India ... and aim for record-high sales of 22.8 million units," Honda said in an earnings statement. Strong sales in India and Brazil enabled its motorcycle business to achieve record-high sales volume and operating profit in the fiscal year ended in March, helping the firm cushion the impact of a bruising EV business writedown as well as sliding car sales in key markets including China.
Hong said Honda's motorcycle business also faces margin pressure due to a transition to EVs in some of its key markets like India and Vietnam. The company expects rising material prices, including the impact of the Middle East conflict, would cause a 313 billion yen hit to its operating profit in the current fiscal year.
Honda Motor Loss Evs Canada EV Project Toshihiro Mibe Electric-Vehicle Business Restructuring Costs Weak Demand Legacy Automaker Scale And Execution Profitable Motorcycle Business Local Components China Operating Loss Median Estimate Poll Of 22 Analysts LSEG 1.2 Trillion Yen Profit
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