Honda margins come under strain as U.S. trade measures and EV slowdown sap earnings

Honda disclosed a sharp deterioration in profitability across the first three quarters of its fiscal year, with operating profit for the nine-month period plunging about 42% to 465.4 billion yen from roughly 805.2 billion yen a year earlier. Consolidated sales slipped 2.2% to 15.98 trillion yen. Management attributed much of the squeeze to a combination of higher U.S. auto-related tariffs and a softer-than-expected U.S. electric-vehicle market that together compressed margins and complicated product planning. In a notable strategic shift, Honda lowered its global 2030 EV-sales share target to 20% from a prior goal of 30% and stopped development on several EV projects — moves that reduce near-term capital commitments but leave open questions about long-term competitiveness in battery-electric platforms. Despite weaker nine-month results, leadership left the full-year profit forecast unchanged at 300 billion yen, signaling either confidence in short-term recovery levers or a reluctance to change guidance amid policy uncertainty. Honda’s motorcycle division continued to deliver comparatively stronger returns and helped cushion the hit from auto operations. Investor reaction was mutedly positive on the day, with Honda shares edging up while Tokyo equities benefited from unrelated political news. The firm’s update should be read in the context of sector-wide margin pressure: other major manufacturers have reported duty- and logistics-driven cost increases and are weighing responses such as price adjustments, tighter control of input costs and regional sourcing changes to protect profitability. Suppliers across the value chain are feeling the strain from higher component prices and longer lead times, transmitting cost pressure back to vehicle makers. For Honda, the immediate priority appears to be protecting cash flow and margins, but the pared-back EV ambition increases the risk of a later catch-up investment cycle if EV adoption accelerates. The interplay of trade policy, shipping and supplier dynamics makes near-term earnings volatile; how quickly policymakers or markets normalize will determine whether Honda’s defensive posture preserves shareholder value or costs strategic ground in electric mobility.