Honda’s Massive Loss: A Half-Baked EV Strategy That Went Astray

Editorial

13:59 JST, March 24, 2026

This is particularly disappointing, given that Honda Motor Co. was expected to take the lead in a comeback among Japanese automakers, which have fallen behind in their electric vehicle (EV) strategies.

Honda has announced that it expects to post a net loss of up to ¥690 billion for the business year ending March 2026. Due to sluggish sales of EVs in its key U.S. market, the company will post a loss of up to ¥1.3 trillion due to factors such as the canceled development of its flagship models.

This will be the first time for Honda to fall to a net loss since it became a listed company. The situation is grave, as the company expects EV-related losses could swell to as much as ¥2.5 trillion by the business year ending March 2027.

In 2021, Honda unveiled a strategy under which it would make all its new vehicles sold worldwide either EVs or fuel cell vehicles (FCVs) by 2040. Honda was the first Japanese automaker to come up with this complete “non-gasoline” policy.

However, the global EV market is currently dominated by U.S. and Chinese players. In 2025, EV sales were led by China’s BYD with about 2.26 million units, followed by Tesla, Inc. of the United States with about 1.64 million units, demonstrating overwhelming competitiveness.

In the EV sector, competitiveness hinges on technologies distinct from those of gasoline-powered vehicles, such as batteries that enable long-range driving and software for autonomous driving and vehicle control. The reality is that Honda has likely fallen behind its U.S. and Chinese rivals in developing these technologies.

Demand for EVs has not grown as expected due to short driving ranges and the inconvenience of charging, and the reevaluation of policies treating EVs favorably in Europe and the United States can be seen as a miscalculation. The challenges are significant, as evidenced by the massive losses posted by General Motors Co. of the United States and Germany’s Volkswagen AG.

However, given the importance of decarbonization, it is still strongly believed that the transition to EVs will proceed in the medium- to long-term. It is crucial to reassess the pace of popularization and adopt a flexible strategy.

To rebuild its EV strategy, the company must first prioritize a swift recovery in profitability. Honda says it plans to boost sales by expanding its lineup of hybrid vehicles — which combine engines and electric motors — an area in which it holds a competitive advantage.

Revising its partnership strategy is also essential. Given the massive costs involved in EV development, there was a strong consensus that Honda needed a partner. Wasn’t this sense of crisis the underlying reason for its move toward a merger with Nissan Motor Co.?

However, talks for the proposed merger between Honda and Nissan fell through in February last year. It cannot be denied that the company’s distracted management led to delays in its EV strategy.

BYD plans to launch a kei lightweight EV model in Japan this year, which could pose a threat to Japanese automakers. Honda needs to conduct a thorough analysis to identify what is lacking in its EV technology and work to restore its competitiveness.

(From The Yomiuri Shimbun, March 24, 2026)