Why did Honda Make its First Ever Annual Loss?
Honda posted an operating loss of JP„414.3bn (US$2.6bn) for the 2025/26 financial year. The company attributed this loss to expenses linked to electric vehicles (EVs) and tariff burdens.
The carmaker noted that changes to EV incentives in the US and relaxed fossil fuel regulations contributed to lower EV sales volumes. This is the first annual loss for Japan's second largest carmaker in 70 years and its first since going public in the 1950s.
Honda announced earlier in the year that it expected to record annual losses. The company cancelled three EV models planned for North America: the Honda 0 SUV, Honda 0 Saloon and Acura RSX.
First loss in seven decades
Honda recorded total EV-related losses of JP„1.578tn (US$9.95bn) during the 2025/26 financial year.
It was previously committed to becoming a fully electric car company by 2040 and company has updated its strategy to aim for carbon neutrality by 2050.
In its company presentation covering the financial year, Honda says: "excluding EV-related losses, we were profitable." The company noted that the business environment was harsh beyond EVs.
Honda mentioned factors such as higher tariff burdens and semiconductor supply chain shortages affecting its operations. Looking forward, the company says it will expand production in India, where motorcycle sales have been strong.
The carmaker says it will aim to expand profitability in North America by strengthening sales of internal combustion engine and hybrid EV models.
Cancelled North American models
News of the scrapped EV models first emerged in March 2026. The cancelled vehicles were the Honda 0 SUV, Honda 0 Saloon and Acura RSX.
Honda CEO Toshihiro Mibe said at the time: "Despite all measures we have taken, it will be extremely difficult to ensure profitability of our EV models.
"Moving forward into the production and sales phase under the current conditions will likely result in further losses over the long term.
"We are fully aware that many Honda associates, business partners and those who are on the front lines of sales have devoted great passion to these EV models and many customers have high expectations for them."
At the time, Toshihiro said the maximum total amount of losses estimated as of today was JP„2.5tn (US$15.7bn) for EV-related losses. He noted that it was regrettable that such a large loss was recorded.
Toshihiro added: "What is expected of the Honda management team now is not to justify the past, but to face this reality squarely and transition our automobile business to a structure that enables mid to long-term growth."
Sony Honda Mobility discontinues AFEELA
Sony Honda Mobility, established in 2022 to produce EVs, announced its flagship vehicle, the AFEELA 1, has been scrapped.
Both the AFEELA 1 and its second prototype model that had been under development have been discontinued.
The decision followed discussion between parent companies Sony and Honda.
Sony Honda Mobility issued full refunds of the reservation fees received for current holders of reservations for AFEELA 1 in California.
Honda and Sony say in a joint statement that they "intend to jointly announce SHM's future direction, mid to long-term positioning as well as contributions to the future of mobility at the earliest possible opportunity".
