Honda Motor just posted its fourth straight quarter of year-on-year profit decline, and this one was a big one. The Japanese automaker reported that operating profit for the October to December 2025 quarter fell 61.4%, dragged down by a perfect storm of U.S. import tariffs, costly EV writedowns, and weakening vehicle demand. It’s a rough stretch for a company that still sells millions of cars globally each year.
- Honda’s third-quarter operating profit fell 61.4%, marking a fourth consecutive year-on-year decline, as U.S. import tariffs and weakening demand for electric vehicles weighed on results.
- For the full fiscal year ending March 31, 2026, Honda maintained its forecast for operating profit at 550 billion yen, representing a 54.7% decrease from the previous fiscal year.
- Honda’s motorcycle business continued to perform strongly, with global sales led by India and Brazil, helping offset weakness in its automobile operations.
How Bad Was the Quarter?
Pretty bad. For the most recent quarter (three months ended December 31, 2025), Honda’s operating profit declined 61.4% to 153.3 billion yen, with an operating margin of just 2.9%. That’s roughly $987 million, which sounds like a lot until you realize it used to be much bigger.
Zoom out to the nine-month picture, and it gets even more concerning. For the nine months ended December 31, 2025, Honda reported operating profit of 591.5 billion yen, down 48.1% compared to the same period in 2024. Sales revenue decreased 2.2% to 15,975.6 billion yen, while profit attributable to owners fell 42.2% to 465.4 billion yen.
The auto business itself? Honda said its automobile business booked an operating loss for the first nine months of the financial year. Yes, you read that correctly. The car division lost money.
Tariffs and EV Costs Did Most of the Damage
Two major factors crushed Honda’s bottom line this quarter. First, U.S. tariffs have been eating into margins at an alarming rate. One-time EV-related expenses had a negative impact of 267.1 billion yen on the auto segment, and the tariff impact was negative by 279.5 billion yen. That’s a combined hit of more than $3.5 billion on just the automobile business alone.
Honda expects duties to lop off about 310 billion yen ($1.98 billion) this fiscal year, with operating profit forecast to plunge 55 percent. And those tariff estimates have actually come down from an original forecast of 450 billion yen, meaning Honda has found some ways to soften the blow.
On the EV front, Honda isn’t alone. Stellantis said last week it would take 22.2 billion euros in charges as it scales back its EV ambitions, following similar writedowns at Ford and General Motors. The entire industry is recalibrating as buyer interest cools and hybrid models gain favor over pure electric vehicles. Even popular sellers like the 2024 Honda Accord hybrid trim have shown that consumers still prefer electrified options that don’t fully ditch the gas engine.
Motorcycles Thrive While Cars Struggle
The gap between Honda’s two biggest businesses couldn’t be wider right now. Motorcycles are raking in money. Cars are bleeding it.
Honda’s motorcycle operations saw solid sales in India and Brazil, and the company continues to aim for 21.3 million units, which would be record sales. That’s a bright point in an otherwise gloomy earnings release.
For automobiles, the forecast sits at 3.34 million units for the full year. Honda’s CFO, Eiji Fujimura, said the company is on track to ship 3.34 million vehicles by the end of its fiscal year. This reflects a reduction of 110,000 units in the North American region due to the impact of semiconductor shortages.
Executive Vice President Noriya Kaihara addressed the situation at an earnings briefing, saying that Honda needs to “build a lean operating structure that can respond flexibly to changes in the business environment.”
What Comes Next for Honda?
The company maintained its operating profit forecast for the year ending March 2026, at 550 billion yen. That suggests Honda doesn’t expect things to get worse from here, but it also signals there’s no quick recovery on the horizon.
Honda noted that, excluding one-time EV-related expenses and tariff impacts, the automobile business would have been “in line with last year” with an operating margin of approximately 3.6%. So the core business isn’t falling apart. It’s the external pressures and restructuring costs that are causing the pain.
Honda is lagging local players in China both in terms of pricing and software. Company leadership said Honda needed to boost the competitiveness of its business through a restructuring of its approach as it faces intensifying global competition.
The failed merger talks with Nissan earlier in 2025 also loom large. Nissan’s new chief executive, Ivan Espinosa, now suggests that while the merger is off the table, the appetite for working together isn’t gone. Both brands are revisiting the idea of teaming up on jointly developing products and powertrains. That kind of partnership could help both companies share costs and compete with well-funded Chinese rivals down the road.
Honda still has a lot going for it: a loyal customer base, a dominant motorcycle business, and hybrid technology that buyers actually want. But this quarter was a wake-up call. The road back to healthy auto profits will take time, smart cost management, and the right product mix to match what buyers are actually shopping for.
