Honda has cut its annual profit forecast by 20% to 550 billion yen ($3.6 billion) due to U.S. trade tariffs, chip supply disruptions, and intensifying competition from Chinese EV makers in Southeast Asia. The company anticipates a 385 billion yen loss from tariffs and faces sales declines in key markets like Indonesia.
-
Honda’s profit cut stems from U.S. tariffs and Nexperia chip halt by China.
-
Chinese EV brands like BYD are eroding Japanese automakers’ dominance in Southeast Asia.
-
Sales in Indonesia dropped nearly 30% in the first nine months, with Asia-wide projections down 10% to 925,000 units.
Honda profit forecast slashed 20% amid U.S. tariffs and China EV rivalry. Discover impacts on sales, strategies in Southeast Asia, and future in India. Stay informed on global auto shifts—read now for key insights.
What is causing Honda’s profit forecast cut?
Honda’s profit forecast cut is primarily driven by escalating U.S. trade tariffs, supply chain disruptions from chip shortages, and fierce competition from Chinese electric vehicle manufacturers. The automaker revised its operating profit expectation downward to 550 billion yen ($3.6 billion) for the fiscal year ending March 2026, a 20% reduction from the prior 700 billion yen estimate. This adjustment reflects higher EV production costs and a temporary halt in semiconductor exports from Nexperia, now under Dutch control after separation from China’s Wingtech.
How is Chinese EV competition affecting Honda in Southeast Asia?
Honda is grappling with intensified rivalry from Chinese EV brands like BYD, which offer competitive pricing and rapid market penetration in regions such as Thailand and Indonesia. According to an industry insider, “Southeast Asia is starting to be significantly impacted by Chinese players. The growth of Chinese EVs in Thailand over the past two years has been extraordinary.” This has led to substantial sales declines for Honda, including a nearly 30% drop in Indonesia through the first nine months of the year, 18% in Malaysia, and 12% in Thailand. Executive Vice President Noriya Kaihara noted at a media briefing, “In markets like Thailand, the competitive landscape is quite intense and overall we have lost our competitive edge in terms of pricing.” To counter this, automakers are compelled to reduce prices and increase promotions to retain customer interest. Honda now projects Asia sales, including China, at 925,000 vehicles this year—a 10% decrease from the earlier 1.09 million forecast—with non-China sales expected to fall by 75,000 units, up from an initial 5,000.
The broader strain on Honda’s operations includes U.S. trade measures, which the company forecasts will result in a 385 billion yen ($2.6 billion) loss, an improvement from the previous 450 billion yen ($2.9 billion) projection. Supply disruptions tied to Nexperia’s takeover by the Netherlands on September 30 exacerbated production issues, leading to a cut in vehicle sales guidance to 3.34 million units. Production is set to rebound starting the week of November 21 as supply stabilizes.
In China, Honda delayed the launch of its Ye Series electric vehicles due to elevated costs and software deficiencies. To address this, the company partnered with Momenta to enhance autonomous driving technology, aiming to regain footing in the world’s largest EV market. Despite these efforts, shares dipped 4.7% on Monday amid investor concerns over Japan’s diminishing automotive presence in Southeast Asia.
Looking beyond challenges, Honda is pivoting toward untapped opportunities. The company announced plans last month to position India as a manufacturing and export hub for one of its upcoming electric vehicles, capitalizing on the market’s slower adoption of Chinese EVs. This strategic shift could bolster long-term growth as Japanese automakers seek diversification.
Analysts highlight deeper structural issues for Honda. Yoshio Tsukada, an industry expert, described the company’s profit distribution as “unbalanced,” suggesting a potential separation of its motorcycle and automobile divisions. He argued that isolating the motorcycle business could allow it to thrive globally, while the auto segment might require administrative reforms to address ongoing pressures.
Frequently Asked Questions
Why did Honda reduce its vehicle sales guidance?
Honda lowered its sales guidance to 3.34 million units due to chip supply disruptions from Nexperia’s export halt and increased EV production costs. These factors delayed output, but recovery is expected from November 21, helping stabilize global deliveries.
What strategies is Honda using to compete with Chinese EVs?
Honda is partnering with firms like Momenta for advanced autonomous driving tech in China and establishing India as an EV manufacturing base for exports. It also plans price reductions and promotions in Southeast Asia to counter aggressive Chinese pricing from brands like BYD.
Key Takeaways
- U.S. Tariffs Impact: Honda anticipates a 385 billion yen loss, underscoring the ongoing effects of trade policies on profitability.
- Southeast Asia Sales Slump: A 30% drop in Indonesia highlights the rapid rise of Chinese EVs, forcing pricing adjustments.
- Strategic Pivots: Focus on India and tech partnerships like Momenta offers pathways to mitigate competition and drive future growth.
Conclusion
Honda’s profit forecast cut reveals the multifaceted pressures of Chinese EV competition, U.S. tariffs, and supply chain vulnerabilities in the global automotive sector. With revised expectations and targeted strategies in emerging markets like India, the company is adapting to sustain its position. As trade dynamics evolve, stakeholders should monitor Honda’s execution for signs of recovery and innovation in electric mobility.
