Honda Shifts Gears on EVs Following Massive Quarterly Loss

he Japanese automaker posted a nearly $1.6 billion operating profit loss, as it writes off losses from its EV efforts and tariffs. The ‘Power of Dreams’ brand is taking a massive loss Japanese automotive giant Honda is rethinking its strategy regarding electric vehicles as it absorbed red-ink losses stemming from their development and the impact of U.S. tariffs.

In the first quarter of its 2025-2026 fiscal year (April 1 to June 30, 2025), Honda took a one-time charge of ¥113.4 billion (~$780 million) related to its EV-related troubles. In total, the impact of the EV charge and its exposure to tariffs took a toll on Honda’s operating profit during the quarter, as earnings fell to ¥244.1 billion (~$1.69 billion) from ¥484.7 billion (~$3.35 billion) just one year ago.

During a press conference on August 6, Tokyo time, Honda Managing Executive Officer Eiji Fujimura attributed the nearly $780 million charge regarding EVs to its mistakes, adding that they aren’t “optimistic” about the future of electric vehicles.

Honda is struggling to sell EVs profitably Although Honda still plans to launch its 0 Series line of EVs in the U.S. in 2026, the company has delayed product development and investment in a Canadian EV production hub. However, it struggles to come to terms with the loss of the U.S. federal tax credit incentive and the cooling growth in EV demand. Currently, Honda sells two EVs in the States, the GM Ultium-based Honda Prologue and Acura ZDX crossovers, which have had healthy sales numbers. Through June, American Honda moved 16,317 Prologues, while Acura sold 10,335 ZDX; numbers that were only possible with heavy incentives.

Honda spent an average of more than $12,000 on each Prologue and $21,000 on each ZDX it moved during the April-June quarter.

In addition, Honda’s attempts to break into the mecha-competitive Chinese EV market with its line of locally developed EVs have not been a fruitful experiment for the automaker. In remarks, Fujimura noted that Honda’s Chinese-market EVs were too expensive amidst a sea of local brands competing in local price wars, and that their cars lacked important connected car technology features that Chinese consumers found on less costly models.

“We are struggling with EVs there,” he said. “We are underachieving against the initial plan.”

one thing to note is that Honda remains exposed to potential trade issues with Mexico and Canada, as a formal agreement with the respective countries has not been finalized. For the full fiscal year to March 31, 2026, Honda estimates it will incur ¥190 billion ($1.31 billion) in tariff costs on complete vehicles imported to the U.S., with the most significant chunk coming from the USMCA nations.

Honda sources a third of its vehicles from tariff-targeted Mexico and Canada, including popular models such as the compact HR-V crossover, the Acura ZDX, and Honda Prologue EVs from GM’s Ramos Arizpe plant, as well as select units of the Civic and CR-V from Alliston, Ontario.

"With the Biden CAFE standards all but saying that they want gas cars to be impossible to make by 2030, you've got to cut the auto manufacturers some slack for trying something else."

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Yet did indeed Tell It Right: allow the marketplace to decide which kind of cars get built. Let me provide a little perspective on what I've seen living in Japan with my wife who's a former Japan national.

Quick Backgrounder on Japan Geography

The geography of Japan is a mixed bag. The country is 75% mountainous, yet 43% of its people live in the flat Kanto Plain (greater Tokyo region) that covers only 8% of Japan's land mass.

The upside of Japan's geography is that volcanic hot spring resorts abound and the rich soil in the mountains flowing down to the sea brings precious nutrients to enable fish and shellfish to thrive.

But there's a downside: 3 typhoons a year hit Japan (on average) as opposed to 2 hurricanes in America. East Asia's rainy season also causes severe mud slide and flooding hazards. And Japan's earthquake and tsunami threats are among the highest in the world.

Plus Japan has almost zero oil to pump from the ground. I checked online and found the average cost of a gallon of gas today in the USA is $3.17 versus $4.77 a gallon in Japan (exchange rate of ¥145 to $1.00).

The Current Car Buying / Usage Scene in Nippon

I live in a Japanese city where I play pickleball and get rides from owners of various car models. One guy is a test driver at the local Honda R&D and huge test track.

Generally, the standard ICE car is going away in favor of two choices: the stylish, excellent performance hybrid or the smaller pure electric-only car.

My Honda friend has taken us on long winding roads in the mountains and the performance of his CRV model is tremendous. But his wife has her own pure electric car which is perfect for inner city/mall shopping or getting to her part-time job.

Now an important point: the boxy all-electric non-hybrid cars are totally under-powered for interstate, highway driving here.

Yet the pure EVs have a good market for driving inner and outer city roads at low speeds. The inter-state highways where the limit is 62 MPH are not appropriate for the pure EV car.

Another key factor is traffic related deaths. Japan's deaths for 100,000 inhabitants is 2.1 percent whereas America's death rate is six times higher: 12.84 deaths per 100,000 inhabitants.

Bottom-line: Japan's drivers, with monetary incentives from the government are buying both the high-powered hybrids and the small, plain-jane all-electric cars.

Pure ICE vehicles are no longer in favor here. However, interestingly, there's a big international market for used Japanese cars! An Afghan guy I met at the Japanese language school speaks enough Russian and Japanese to be a used car exporter, mostly to Russian buyers.

“I’ve always thought at some point the Chinese were going to find a way to enter the US market with $15,000 cars and $20,000 SUV’s, with much better build quality and equipment than the old Yugo or original Hyundais.”

China has a $15,000 BYD plug in hybrid that does 80 miles on the pack then switches to the small gas generator for 1200+ more miles of range. A group of drivers drive one day and night in a major Chinese city till it ran empty at 1300 miles total range. It was getting 90 mpg American and hit 108mpg for parts of the trip. These were not hypermile test drivers they were journalists and camera men.

BYD plans to make that 5 passenger sedan in Mexico soon, when they do they will dominate that market. NAFTA means any Mexican made BYD is a Mexican car and can cross the border at will with Mexican plates. Anyone who has ever been to South Texas or El Paso can tell you how many legal Mexican vehicles cross every day and stay as well. A Mexican national is under no obligation to title a vehicle in Texas or any other state. A vehicle licenced under a Corp or LLC also is under no obligation to title a vehicle in Texas or any other state. I fully intend to get a BYD plate it using an international LLC in Mexico and drive it across and to North Texas. Two of them the wife gets one too. They will probably replace the Model 3 outright and supplement the Model Y when the cargo space is not needed.

My wife and I have both a full EV (BEV) crossover style car, and a gas pickup. I respectfully disagree that EV’s are better for short drives around town, at least from a gas savings perspective. We like our EV mainly because we drive it 25K miles per year, with 18K miles charged at home. That’s a lot of miles with a lot of gas savings. If we either didn’t drive a lot of miles, or if we couldn’t do charging at home (where the real gas savings is, unlike using roadside charging that costs almost as much as gas), then an EV wouldn’t be worth it. Part of it also is how we utilize it. My wife and I no longer say “her car” or “his truck”. We say “the EV” and “the truck” with the idea that either of us drives the EV to save gas, unless it involves pickup chores.

Of course, EV’s here are different from the small ones you describe. Mine has a crazy amount of power and can handle steep hills better than the gas pickup.

That's great to hear you're getting some nice cost savings using the a high performance EV. And from your earlier posts, I remember how conscientious you are about tracking expenses, using solar panels, etc. and earning a profit on your transportation needs. It's good stuff.

I no longer have a driver's license. Between car rides and local trains we are getting our exercise and not inconvenienced very much. We have home delivery of groceries and maybe every couple weeks, we walk a cart to the local grocery store 1/2 mile away for buying eggs, milk, etc.

The local government here in Japan discourages older guys like me (72) from driving anymore. And the biggest reason is safety of other drivers, pedestrians etc.

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