Honda forecasts profit rebound after first ever annual loss

Honda Motor Co. forecast a rebound in operating profit for the current fiscal year, even after an ill-timed bet on electric vehicles led to a writedown and a record loss. The company predicted ¥500 billion ($3.2 billion) in profit for the period ending March 2027, beating the consensus estimate of ¥212.4 billion, and sending the shares higher. It posted a ¥414.3 billion shortfall during the previous year, its first annual loss since it was founded in 1948. Honda has struggled to keep up with intense competition as the global automobile industry shifts toward electrification and automation. The Japanese manufacturer lacked the models to tap into renewed demand for gas-electric hybrids in the US, while in China local brands churning out EVs have all but taken over what is now the world’s largest car market. The onus now falls on Chief Executive Officer Toshihiro Mibe to stem further losses and stabilize Honda’s automobile business before it becomes too much of a burden for its more profitable motorcycle unit. “Our biggest regret is not being able to react to rapid changes in the industry,” Mibe told reporters on Thursday. “We need to return to a path that leads to sustainability.” The shares rose 3.8%, the most since October, to ¥1,320 on Thursday. The stock has fallen 14% this year. Honda plans to roll out 15 new hybrid models by March 2030, primarily in North America, as part of its effort to reallocate resources away from EVs and toward mixed powertrain vehicles. Meanwhile, plans to build an EV battery supply chain in Canada are indefinitely on hold. The company is also aiming to get its four-wheeler business back on its feet within three years, with North America, India and Japan identified as core markets. Still, Mibe said automobile and motorcycle unit sales are forecast to grow this fiscal year. [caption id="attachment_58361512" align="alignnone" width="2010"] (Courtesy/Bloomberg)[/caption] “The management group there has been shielded too long by a super profitable motorcycle business that allows them to push problems with the automotive business under the rug,” said Christopher Richter, a senior analyst at CLSA Securities Japan. “The motorcycle business has become a crutch for Honda that prevents them from taking a serious look at their automotive business.” Almost one in three motorcycles sold globally carries the Honda badge. The unit generates a majority of the company’s operating profit despite accounting for less than a fifth of sales. In India, one of the world’s fastest growing motorcycle markets, Honda expects annual production to reach 8 million units in 2028, up from 6.25 million in 2026. A host of geopolitical challenges — war in the Middle East, US tariffs and a shortage of Chinese semiconductors — have only added to the challenges faced by global carmakers as they navigate the transition toward EVs and software-focused development. Honda first sounded the alarm of a costly slowdown in EV demand in early February. Soon after that it warned of a massive impairment charge that led to it scrapping plans with Sony Group Corp. to co-develop EVs just months before the first vehicles were set to roll off production lines. Honda said in March that it’s looking to boost its hybrid-vehicle lineup by reallocating resources and streamlining products so that it can raise production, especially in North America. It’s also aiming to enhance its business in India, which is a growth market both for cars and motorcycles. “By expanding the application of these next-generation hybrid systems across additional models and future vehicle launches, Honda is likely to further strengthen the competitiveness of its automobile business,” said Bloomberg Intelligence senior auto analyst Tatsuo Yoshida. --Nicholas Takahashi (Bloomberg)

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Honda forecasts profit rebound after first ever annual loss

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