Honda flags first annual loss, hit by US$15.7 billion EV charge

Honda employees work along the vehicle assembly line before an event announcing plans for a Honda electric vehicle battery plant in Alliston, Ont., on Thursday, April 25, 2024. THE CANADIAN PRESS/Nathan Denette

Honda will fall to ‌its first annual loss in almost 70 years as a listed company, hit by up to US$15.7 billion in restructuring costs at its EV business, it said on Thursday, as weaker-than-expected demand for the technology hammers automakers.

Under U.S. President Donald Trump, Washington has ended government support for EVs, forcing the likes of Ford and Stellantis to rethink their strategies and book hefty write-downs of their own.

Japan’s second-largest automaker said it expects a hit ​of up to ​2.5 trillion yen ($15.7 billion) as it cancels three EV models planned ‌for production in the U.S.

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While ⁠analysts had expected further EV-related losses at Honda, the size of Thursday’s write-down was a surprise, said Julie Boote, autos analyst at Pelham Smithers Associates.

“The main surprise was that the U.S. production program was canceled, rather than just scaled down. Honda had a very ambitious EV expansion plan, which was badly affected by the changing market environment,” Boote ⁠said.

CEO Toshihiro Mibe told a press conference that EV demand had fallen sharply, making it “very difficult” to sustain profitability.

Honda is also writing down the value of its China business, where it has struggled to compete with the advanced, software-driven cars of rivals such as ⁠BYD.

Honda said it now expects to lose as much as 570 billion yen ($3.6 billion) in the year to the end of March, compared with a previous forecast for a 550 billion yen profit. That would be its first annual loss since it listed on the stock ​market in 1957, a company spokesperson said.

U.S.-listed shares fell about eight per cent in premarket trade after the announcement.

Big write-downs on EVs

Several global automakers have booked ⁠painful write-downs as they scaled back ⁠their EV ambitions in recent months.

Honda’s charge brings the industry tally to about $67 billion. General Motors has warned of a $7.6 billion hit, while Stellantis has flagged $25 billion and ⁠Ford $19 billion.

In addition to its main markets of Japan and the U.S., Honda said it will strengthen its model line-up and cost competitiveness in India, where it sees scope to expand.

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Under pressure ‌from Chinese rivals across Asia and elsewhere, Japanese automakers have increasingly focused on India, a market where - like ⁠the U.S. - Chinese automakers are effectively shut out.

Mibe ‌and Executive Vice President Noriya Kaihara will voluntarily forgo the equivalent of 30 per cent of their compensation for three months while some other executives will give up 20 per cent, Honda said.

The company plans to announce a revamped mid-to-long-term business ‌strategy in the next fiscal year.

(Reporting ‌by Daniel Leussink, Kantaro Komiya and Maki ​Shiraki. Writing by David Dolan. Editing by Clarence Fernandez, Christopher Cushing and Mark Potter)