Honda Forecasts Loss While Keeping Dividend Stable

Honda Motor Co., Ltd. has revised its consolidated financial results for the fiscal year ending March 2026, anticipating significant losses due to a reassessment of its electrification strategy. The company expects a maximum total amount of losses to reach 2.5 trillion yen.

Toshihiro Mibe, Honda CEO, detailed the financial impact: "The maximum total amount of losses estimated as of today is 2.5 trillion yen, of which approximately 1.3 trillion yen will be recorded as an addition to the fiscal year forecasts announced on February 10, 2026."

Despite these non-recurring losses, Honda intends to maintain its shareholder redistribution policy. The company has adopted DOE (dividend on equity ratio) as its indicator to achieve more stable dividends, ensuring no revision to the forecast for the current fiscal year.

Recording impairment on tangible and intangible assets

The cancellation of several models has resulted in immediate financial repercussions. Honda expects to record impairment and write-off losses on tangible and intangible assets intended for the production of these models.

Toshihiro explained the breakdown: "The estimated breakdown of this amount is 1) 820 billion yen to 1.12 trillion yen for operating losses and 2) 110 billion yen to 150 billion yen for the share of the loss of investments accounted for using the equity method in China and other regions." For the current fiscal year, operating expenses are estimated to be substantial.

These write-offs reflect the reality that proceeding with these EV models in the current declining demand environment would likely lead to even greater losses over the long term.

Navigating billion yen losses in China

The competitive environment in China has forced Honda to reassess the recoverability of its investments. Due to the rapid emergence of newer EV manufacturers, Honda’s competitiveness has declined.

Toshihiro noted: "As a result, we are facing strong competition from emerging OEMs, and the competitive environment has become increasingly challenging also in ASEAN (Southeast Asian) markets." Consequently, the company expects to incur an impairment loss on investments in China.

Toshihiro acknowledged: "We recognise that our automobile business has fallen into an extremely challenging earnings situation due to various factors, including 1) our inability to respond flexibly to these changes." This reassessment is part of a broader effort to reorganise the strategic framework and re-establish a more competitive business structure.

Utilising a dividend on equity indicator

Despite substantial losses, Honda is prioritising stable shareholder returns through the DOE indicator.

Noriya Kaihara, Honda EVP, stated: "Although there is a possibility that additional expenses and/or losses will be recorded in the next fiscal year or later, Honda will maintain stable returns to shareholders by 1) improving profitability of its automobile business with the enhancement of the lineup, including next-generation hybrid models, and 2) leveraging solid earnings power and the cash-generating capability of its motorcycle and financial services businesses."

This choice is intended to provide stability and continuity in dividends. The motorcycle and financial services businesses continue to show cash-generating capability, supporting the dividend policy and ensuring that the company maintains its shareholder commitments during the transition.

Establishing investment caps based on earnings

To put the automobile business back on a growth trajectory, Honda is implementing disciplined spending controls.

Noriya explained the new financial focus: "To be more specific, we will tighten the criteria for setting investment caps based on earnings, and we will enforce even more disciplined decision-making than before. Based on prioritization that reflects both strategic importance and profitability, we will be more selective and focused in making investments. Then, we will continuously monitor post-investment earnings performance."

This disciplined approach is intended to strengthen the earnings structure in terms of both volume and profitability. By enforcing these controls, Honda aims to regain its inherent earnings power and generate profit more stably from 2028 onward, ensuring that every yen spent is aligned with strategic importance.

Leveraging cash from the motorcycle business

Honda’s diversified business model provides a financial buffer.

Noriya commented on the company's financial stability: "From a financial stability perspective, we continue to hold cash on hand equivalent to one month’s revenue, which is considered to be appropriate, and the level of borrowing remains relatively low; therefore, we are maintaining a higher credit rating compared to other OEMs."

Toshihiro noted: "With the recording of these EV-related impairments, our consolidated earnings will bottom out in the fiscal years ending March 31, 2026 and March 31, 2027. However, excluding the impact of these non-recurring losses, we estimate that operating profit would remain at the level of 1 trillion yen." This health provides necessary liquidity to navigate the impairment of assets while investing in hybrid growth.

CEO discusses a rapidly evolving business

Toshihiro addressed the press regarding the "extremely challenging" earnings situation and the decision to cancel three North American EV models. He emphasised that while Honda remains committed to carbon neutrality by 2050, the business environment has changed at a speed far exceeding expectations.

Toshihiro cited the easing of U.S. environmental regulations and the rise of newer manufacturers in China as primary factors. He explained that introducing the Honda 0 SUV, Saloon, and Acura RSX without business viability could damage the brand value. He took responsibility for the decision, stating that management must face reality rather than justify the past. 

The CEO also noted that demand for EVs is currently declining but said he believes this trend is not permanent. He assured that Honda would address each affected supplier with care and rebuild its strategy to ensure that, when demand resumes, the company will offer compelling products unique to the brand.