Aerial view of the Honda of San Marcos dealership in San Marcos, Texas on March 12, 2026.
Brandon Bell | Getty Images
shares of honda motor industry Shares rose more than 7% on Friday even as the Japanese automaker posted its first annual operating loss in nearly 70 years.
Honda’s operating loss for the fiscal year ended March was 414.3 billion yen ($2.61 billion), compared with an operating profit of 1.2 trillion yen the previous year. Earnings were squeezed by the company’s ailing electric vehicle business and preparations for related investments, competition from Chinese rivals, and the 346.9 billion yen impact from U.S. tariffs.
“The business environment surrounding our company is rapidly changing, and the future remains uncertain,” Honda said in its earnings report on Thursday.
As part of its EV business restructuring, the company announced that it will suspend the market launch and development of some EV models originally scheduled for production in North America. The Japanese automaker said it expects restructuring its EV business to cost more than $9 billion.
Honda also pointed out that competition among emerging EV manufacturers is intensifying in China. Honda added, “In this highly competitive environment, we have also revised our product launch plans for some EV models.”
“We believe the stock’s positive reaction is driven by the company’s guidance for operating income and net income, which both exceeded consensus estimates by 38%,” Bernstein analyst Masahiro Akita said.
However, Akita said it is unclear whether the guidance fully incorporates potential losses associated with EV investments.
The company is a latecomer to the EV market but faces challenges amid increased competition from Chinese rivals, inflation and U.S. tariffs.
Aya Adachi, associate fellow at the Center for Geopolitics, Geoeconomics and Technology at the German Council on Foreign Relations, pointed out that global car competition is gradually being affected by the rapid growth of China’s electric vehicle production.
“Although Japan was a pioneer in hybrid technology, it was slow to transition to battery electric vehicles, so its presence in China’s new energy vehicle market was limited and it was exposed to increasing pressure in export markets,” Adachi said.
Additionally, engine problems and vehicle recalls also hurt Honda’s reputation. In March, it was discovered that Honda engines used by Aston Martin were causing battery failures, and in January, the Japanese automaker was sued in Canada over a defective 1.5L turbo engine in three Honda models.
However, both city and Nomura The company maintains a buy rating on Honda, expecting future growth.
In a note, Nomura analyst Toshihide Kinoshita touched on the company’s expected profits for the fiscal year ending March 2027 and March 2028, saying, “We expect low earnings on March 27th, but now that the company has announced a revision to its strategy, we believe it is the right time to factor in a full-scale recovery by March 28th.”
Citi analyst Arifumi Yoshida said in a note that Japanese automakers are shifting their focus from “traditional global standard models” to the Chinese and Indian markets. Yoshida said Honda plans to leverage its advantages in the two-wheeler business to capture demand in India’s low-cost segment.
The stock price rose 7.42% to 1,418 yen in the latest trading.
