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.

Is there a problem with government overreach [in Japan].

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Comparing Japan to America in "government involvement" is a topic I often think about as I walk the streets of my mid-sized Japanese city. Comparing cultures and laws is not a perfect science since there so many exceptions. But in three areas, I think, the Japanese are doing an excellent job:

Immigration — Japan has strong control of its border and rigorously screens the 2% immigrant population in the country today. Me and my wife (a former Japanese national) had to produce 50 pages of documentation, photos, and financial records before we were given a 5-year resident alien visa (which we hope will be renewed). And as aliens, we have no rights to vote.
Citizen Respect for Laws & Law Enforcement — Petty theft is very rare here. Evidence of that is how merchandise in the store is on full display. You can even leave your laptop unattended in a public place and it will be there when you come back to it. And going hand-in-hand with this law-abiding culture is training of the kids by the family and schools.
Law enforcement is strict here, yet the incarceration rate is low. Comparisons: number of people in jails in Japan is 40,081; in USA there are 1,808,100 people in jail according to Wikipedia stats.
Drinking & Driving — Here too, Japan is stricter. The legal Blood Alcohol Content (BAC) in the USA varies by state and is generally getting stricter. It's currently between 4% and 8%.
In Nippon the maximum BAC is 3% — regardless, a police office can declare a person drunk even if the BAC is relatively low. Here, Wiki's drunk driving by country analysis is interesting to read.
And the Japanese have good reasons to be be strict about drunk driving: Japanese cities have a denser population; the roads are narrower; single-lane roads are very common; and the sidewalks on secondary streets often lack protective curbstones or rails.
Bottom line: as I mentioned in my previous post, traffic-related deaths are far lower in Japan ( 2.1 deaths per 100,000 inhabitants) versus USA ( 12.84 deaths per 100,000 inhabitants).

So this is a quick rundown. Hope it's some food for thought.

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