Honda has warned it expects a large financial hit after changing course on its electric vehicle (EV) strategy. The company, Japan’s second-largest carmaker, said shifts in US policy and tariffs, together with weakening competitiveness in Asia, are forcing it to adjust plans it had made to focus on EVs.
Honda said it had believed EVs were the optimal long-term solution and had shifted strategy toward popularizing them. But it cited a decline in business profitability because of “the United States government policy shift including the imposition of import tariffs.” The company pointed specifically to the abolition of US tax incentives for EV purchases and to the easing of fossil-fuel regulations under President Donald Trump. It also warned that Chinese-made vehicles, including affordable EVs, have reduced the competitiveness of its products across Asia.
In response to a slowdown in the North American EV market, Honda said it would cancel the launch and development of certain electric models for that region. It added that it may write down investments in China as competition there intensifies.
Honda expects expenses and losses linked to the strategic pivot to total about 2.5 trillion yen (roughly $15.7 billion or €13.6 billion) over several years. For the current financial year to the end of March, the company now forecasts a net loss of between 420 billion and 690 billion yen, versus an earlier profit projection of around 300 billion yen.
The move follows a similar, costly reorientation at Porsche in 2025, when that marque also partially reversed its push into EVs and reported a sharp fall in annual profits.
Honda noted that incentives and support for EVs are also under pressure in Europe. The EU halted plans in December to fully ban the sale of non-electric cars from 2035, in part due to pressure from Germany, and negotiations on new targets are ongoing. Pure battery-electric vehicles accounted for 17.4% of new car registrations in the EU in 2025, according to the ACEA — an increase from the prior year but well short of earlier all-electric targets. Edited by: Kieran Burke