Honda Motor Co. reported a 76% drop in fourth-quarter operating profit on Wednesday, missing analyst expectations by a wide margin and prompting a sharply downgraded outlook for the fiscal year ahead. The Japanese automaker cited intensifying U.S. tariff pressure and softening electric vehicle demand as key drivers of its deteriorating performance.
Operating profit for the quarter ended March 31 fell to 73.5 billion yen ($648 million), far below the LSEG consensus estimate of 275.5 billion yen. While revenue was in line with projections at 5.36 trillion yen, the steep profit decline underscored the growing challenges facing Japan's second-largest automaker.
For the full fiscal year, Honda posted a 12.2% decline in operating income to 1.21 trillion yen and a 24.5% drop in net profit to 835.8 billion yen. Despite record performance in its motorcycle segment, the company's automobile division suffered declining sales, particularly in China and Southeast Asia. Hybrid vehicle sales in North America rose, supported by EV incentives.
Looking ahead, Honda expects operating profit to plunge nearly 59% to 500 billion yen in the fiscal year ending March 2026. Net income is projected to fall more than 70% to 250 billion yen, while revenue is forecast to drop 6.4% to 20.3 trillion yen. "Moving forward, we will carefully assess the impact of tariff policies and expand recovery measures while aiming for further growth in operating profit," the company said in its presentation.
The earnings miss coincides with geopolitical headwinds. President Donald Trump has imposed a 25% tariff on foreign auto imports, a policy that Honda estimates will slash 650 billion yen from its FY2026 operating profit, including a 300 billion yen impact on roughly 550,000 imported vehicles. Honda expects to recover about 200 billion yen through cost-cutting measures.
As part of its strategic response, Honda confirmed it would manufacture its next-generation Civic hybrid in Indiana, shifting production from Mexico to avoid tariff exposure. The automaker also delayed by two years its plan to build an EV supply chain in Ontario, Canada, citing weak EV demand.
Chief Executive Toshihiro Mibe told reporters, "Although the automotive industry is in a very difficult situation, we will definitely look for new directions of growth through strategic partnerships." Talks of a merger with Nissan were terminated in February, though a technology collaboration remains in place.
Honda's updated dividend policy will move from a payout ratio to a dividend-on-equity model, with the company forecasting a 2-yen increase to 70 yen per share for the current fiscal year.
Nissan Motor Co. also posted sharply lower results, with a 94% plunge in fourth-quarter operating profit to 5.8 billion yen. The company reported a net loss of 676 billion yen ($4.5 billion) for the quarter, reversing a profit of 101.3 billion yen a year earlier. Full-year operating income tumbled 88% to 69.8 billion yen as the automaker faced falling sales volume, higher incentives, and inflationary pressures.
In response, Nissan outlined a plan to cut 500 billion yen in costs, including a 20,000-worker headcount reduction and consolidating production facilities from 17 to 10 by March 2028.
