Honda Motor (7267) Status update summary

Background and decision rationale

• Revised forecast for FY ending March 2026 due to drastic changes in the EV market, especially in the U.S., including regulatory easing, incentive discontinuation, and a 1.5 million unit/year gap between 2021 forecasts and 2026 actuals, leading to slower EV growth.

• Competitors, especially in China and ASEAN, advanced faster in electrification and technology, reducing competitiveness and intensifying competition in Asia.

• Decision made to cancel development and launch of three EV models (Honda 0 SUV, Honda 0 Saloon, Acura RSX) for North America due to lack of profitability and market viability.

• Management acknowledges responsibility for the deficit, with executive officers forfeiting 20–30% of monthly compensation for three months in FY 2027 and short-term performance-linked compensation for FY 2026.

• A new long-term EV strategy will be announced in May, with details of the mid- to long-term business strategy to follow in the next fiscal year.

Strategic shift and future direction

• Resource allocation will shift from EVs to new hybrid models (HEVs) to improve profitability and strengthen the business foundation.

• Next-generation hybrid systems and ADAS will be introduced globally from 2027, with a focus on the U.S., Japan, and India.

• In China, strategy will adapt to local electrification trends and supply chain optimization, while India will see an expanded model lineup tailored to local demand.

• Manufacturing operations will be transformed to shorten development periods, improve efficiency, and localize supply chains, especially for hybrid batteries and HEV parts in North America.

• Investment discipline will be tightened, with selective focus on profitable projects and ongoing monitoring of post-investment performance; additional EV-related investments are being reassessed.

Financial impact and outlook

• Impairment and write-off losses up to JPY 2.5 trillion expected, with JPY 1.3 trillion recorded in FY2026 and JPY 1.2 trillion in FY2027, mainly from asset write-offs, supplier compensation, and extraordinary losses.

• Operating profit expected to bottom out in FYE March 2026 and 2027, with a mid- to long-term strategy to restore earnings.

• Despite large one-off losses, underlying operating profit (excluding impairments) is expected to remain around JPY 1 trillion.

• Stable financial foundation maintained, with 4.3 trillion yen in cash and a 60% equity ratio as of December 2025.

• Dividend and sales revenue forecasts for the current fiscal year remain unchanged, with stable shareholder returns targeted.