An aerial view of the San Marcos Honda dealership is seen on March 12, 2026 in San Marcos, Texas.
Brandon Bell | Getty Images
Shares of Honda Motor rose more than 7% on Friday, even after the Japanese automaker posted its first annual operating loss in nearly 70 years.
Honda posted an operating loss of 414.3 billion yen ($2.61 billion) in the fiscal year ending in March, compared with an operating profit of 1.2 billion yen a year earlier. Provisions for its faltering electric vehicle business and related investments, competition from its Chinese rivals, and the impact of a US tax of 346.9 billion yen weighed on its profit.
“The business environment surrounding the Company is changing rapidly, and the outlook is still uncertain,” Honda said in its financial statement Thursday.
As part of its efforts to restructure its EV business, the automaker said it will cancel the market launch and development of some EV models that were scheduled for production in North America. The Japanese automaker said it expects the restructuring of its EV business to cost more than $9 billion.
Honda also noted that new EV makers have intensified competition in China. “Under such a challenging and competitive environment, the Company has revised its product launch plans for certain EV models,” added Honda.
“We believe the positive share price reaction was driven by the company’s guidance on operating and net profit, both of which came in 38% above consensus estimates,” said Masahiro Akita, an analyst at Bernstein.
However, Akita said it is uncertain whether the guideline has a full value on potential losses linked to EV investments.
The automaker, a late entrant to the EV market, has been facing challenges amid increasing competition from Chinese rivals, inflation and US tariffs.
Aya Adachi, a fellow at the Center for Geopolitics, Geoeconomics and Technology of the German Council on Foreign Relations, noted that global automotive competition is being gradually influenced by China’s rapid growth in electric vehicle production.
“While pioneering hybrid technology, Japan’s slow transition to battery-powered electric vehicles has left it limited in China’s new energy vehicle market and exposed growing pressure on export markets,” Adachi said.
In addition, engine problems and car recalls also damaged Honda’s reputation. In March, it was discovered that the Honda engines used by Aston Martin were causing the batteries to fail and in January the Japanese company was slapped in court in Canada over the damage to the 1.5L turbocharged engine in three Honda models.
That means, both Citi again Nomura We maintain a buy rating on Honda, expecting to see some growth for the company in the future.
“While we expect earnings to be lower on 3/27, we think the time is right to price a full recovery on 3/28 as the company has announced a revision to its strategy,” Nomura analyst Toshihide Kinoshita wrote, referring to the company’s estimated earnings for the years ending March 2027 and March 202.
The Japanese automaker is shifting its focus more toward the Chinese and Indian markets from a “standard global model,” Citi analyst Arifumi Yoshida said in a note. Yoshida said Honda plans to use its profits in the motorcycle business to capture demand in India’s low-cost segment.
Shares last traded 7.42% higher at 1,418 yen.
