Honda reports declining profit as Trump’s tariffs and EV moves hurt Japanese automaker’s results

Honda’s Profit Plunges 42% as Trump Tariffs and EV Slowdown Impact Operations

Honda Motor Co. reported a significant 42% drop in profit for the nine-month period ending in December, with earnings falling to 465.4 billion yen ($3 billion) from 805.2 billion yen in the same period a year earlier. The Tokyo-based automaker cited U.S. tariffs as a major factor in the decline.

This marks the second consecutive year of profit decline during this period for the manufacturer of the Accord sedan, Civic compact, and Odyssey minivan. Overall sales for the three quarters dipped 2.2% to 15.98 trillion yen ($102.6 billion).

Despite these challenges, Honda maintained its full fiscal year profit forecast at 300 billion yen ($1.9 billion), suggesting the company expects some stabilization in the final quarter.

The company identified a slowdown in electric vehicle demand in the U.S. market as a significant negative factor affecting performance. In response to changing market conditions, Honda has reduced its global EV sales ratio projection for 2030 from 30% to 20% and canceled development of some planned electric vehicle models.

“The EV market is changing more rapidly than we anticipated,” a Honda executive explained during the earnings briefing. “We need to be more flexible in our approach to electrification while maintaining our commitment to carbon neutrality.”

Honda’s strategic shift comes as the Trump administration has begun dismantling programs supporting electric vehicle adoption that were implemented during the Biden presidency. The current administration has shown preference for policies supporting the oil and gas industry over cleaner transportation alternatives.

While the automotive division struggled, Honda noted that its motorcycle business performed relatively well during the period, helping to partially offset losses in other segments.

The impact of U.S. trade policies remains significant for Japanese automakers. Last year, then-President Trump lowered tariffs on automobiles and auto parts to 15% from an earlier announced 25% after Japan promised to invest $550 billion in U.S. projects. However, even the reduced tariffs continue to pressure profit margins for Japanese manufacturers with significant North American operations.

The tariff situation represents a broader challenge for Japan’s export-dependent economy. Last week, Toyota Motor Corp., Japan’s largest automaker, also reported a decline in profits and announced leadership changes, with Chief Financial Officer Kenta Kon set to become the company’s new chief executive and president.

Despite the challenging news, Honda’s stock rose 2.1% in Tuesday’s trading, buoyed by broader market optimism. The Nikkei 225 benchmark finished 2.3% higher, setting a record high for the second consecutive day.

The market rally has been partially attributed to political developments in Japan, where Prime Minister Sanae Takaichi—who took office in October as Japan’s first female leader—secured a decisive parliamentary election victory for the governing Liberal Democratic Party over the weekend. This political stability is expected to facilitate the implementation of economic growth policies through increased government spending, particularly in technology and defense sectors.

For Honda and other Japanese automakers, navigating the evolving global regulatory landscape while managing the transition to electric vehicles remains a complex challenge. The company’s revised EV strategy signals a more cautious approach to electrification while still maintaining longer-term sustainability goals in an uncertain market environment.

Industry analysts suggest that Japanese automakers may need to accelerate investment in U.S. manufacturing facilities to mitigate tariff impacts and align with evolving trade policies, representing a potential shift in global automotive manufacturing dynamics.