End of subsidies and Chinese competition: Honda reports first annual loss since 1957 amid EV market 'freeze'

For the first time since its IPO nearly seven decades ago, Japanese automaker Honda is preparing to go “red.” What seemed like a bold transition to the electric age has turned into a $15.7 billion financial nightmare, forcing the company to fundamentally rethink its future.

A 2.5 trillion yen bet that failed

Honda recently announced that it expects a net loss of 570 billion yen ($3.6 billion) for the fiscal year ending in March. The figure is downright shocking, considering that the previous forecast indicated a solid profit of 550 billion yen.

The driver of this financial collapse is massive restructuring costs in its electric vehicle (EV) division. The company decided to “write off” 2.5 trillion yen from its assets after the radical decision to cancel production of three key electric models planned for the US market.

The "Trump Effect" and the Withdrawal of Government Support

The political context in the United States played a decisive role in this dramatic coup. Under the administration of President Donald Trump, Washington has cut subsidies and federal support for electric technology, leaving automakers "uncovered" in the face of massive investments that no longer have political or economic support.

Honda is not alone in this storm. The Japanese giant joins names like Ford Motor Company and Stellantis, which have also been forced to take significant write-downs and scale back their electric ambitions as consumer demand has plummeted.

    "Demand for electric vehicles has fallen much more violently than anticipated, making maintaining profitability an almost impossible mission at this time," Honda CEO Toshihiro Mibe said in a sober-toned press conference.

Eastern Front: China, another lost battle

If the problem in the US is politics and low demand, in China — the world’s largest auto market — the problem is fierce competition. Honda has admitted that it is having major difficulties keeping up with local electric car manufacturers, which benefit from much lower production costs and a faster pace of innovation. As a result, the company has been forced to reduce the book value of its operations in the region.

What's next for Honda?

This historic loss marks a turning point not just for Honda, but for the entire global electrification strategy. The message is clear: technological enthusiasm has collided with economic pragmatism.

• Portfolio reassessment: Honda will need to refocus on hybrid models, which are currently enjoying greater popularity among customers reluctant to pure electric cars.
• Operational efficiency: The $15.7 billion restructuring is a "bitter medicine" meant to clean up the balance sheet for a possible comeback in the coming years.

For a company that hasn't experienced an annual loss since 1957, 2026 will go down in history as the year the "electric dream" received a bill that was far too difficult to pay.