The FY ending 2025 March for Honda Motors witnessed an operating loss of 414.3 billion yen, or nearly $2.63 billion, marking the end of Honda’s long streak of annual profits since its stock exchange listing back in the 1950s. For almost seventy years, Honda has been on a streak of not having lost any year’s profits.
The surprise loss incurred by Honda in its EV model shook the market. Market analysts expected Honda to lose a total of 315.6 billion yen. However, Honda surpassed expectations by losing 99.7 billion more than what was expected. One year back, the company had registered profits of 1.2 trillion yen.
An Electric Vehicle Bet of $9 Billion That Destroyed Profitability
The heart of the problem lies with the reorganization of Honda’s electric vehicle program. In this year alone, Honda wrote off 1.45 trillion yen in total costs related to its electric vehicle program.
This is just one example of a much bigger misjudgment that affects many of the traditional car manufacturers. In fact, Honda and some of its competitors have made large investments in their EV transition plan that simply has not panned out as well as expected. Growth in demand slowed, and competition increased.
This is not the end of Honda’s efforts to produce an EV vehicle. Honda has not abandoned the concept of electrification. It has simply slowed down and reduced its expenses.
Expect More Pain for the Year Ahead
There may be rough times ahead for Honda. It is anticipated that the company will have another expenditure of 500 billion yen this fiscal year related to its electric vehicle plans.
Further, the company warned of broader cost challenges. Increases in material costs, along with geopolitical instability, including disturbances resulting from the Middle East conflict, may result in an additional 313 billion yen reduction in operating profit in the financial year 2026. Moreover, U.S. tariffs policies create additional uncertainties because of high sales volumes in America.
Honda Still Sees a Return to Profit This Year
This relies on cost management, a reduced EV investment timeline, and one segment where Honda still stands firmly on its feet: motorcycles.
While the failure of the Honda EV might take all the headlines, it is the motorcycle line that has been quietly persevering in the face of adversity.
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Motorcycles Bear the Load
The sales of Honda’s motorcycles division reached an all-time high in FY2025, as well as its operational profits, thanks to the robust demand for motorcycles coming from India and Brazil.
Honda will increase its motorcycles production capacity in India and set out to sell its record-breaking number of 22.8 million units during the current year. India has been home to the biggest two wheeler market globally, while Brazil provides another growth pillar with the increasing consumer demand.
This is the business that keeps Honda’s recovery strategy realistic. As the company struggles with losing money on the electric vehicle segment, its motorcycle business earns actual money from growing markets.
China Makes It Worse for Honda
The next big challenge for Honda’s auto operations was from another front: China. The sales of vehicles there went down, affecting the performance of the automotive segment. For quite some time now, China had been a dependable source of profits for companies like Honda that make cars. But that is changing now, with local makers of electric vehicles having taken an upper hand over their foreign competitors.
Honda’s recovery strategy has not been outlined in this report, however, the pressure for such is mounting.
What’s Next for Honda
Honda’s failure is just another example of a tough pill that many major car makers have had to swallow during the boom period between 2020 and 2022. Many established car companies made huge investments to develop their electric vehicles but are now reversing course.
Recovery into sustainability of profits at Honda would need the following: first, controlling expenditure on electric cars, secondly, expanding motorcycle sales in emerging economies, and thirdly, taking a cautious approach towards the China market. This is indicated by the projected profits of 500 billion yen for the year.
