Honda’s first annual loss in its history as a publicly traded company has arrived — and it’s a direct result of the automaker’s costly retreat from its once-ambitious electric-vehicle plans. On Thursday, Honda Motor reported a net loss for the fiscal year that ended March 31, marking the first time the 77-year-old company has finished a year in the red since listing on the Tokyo Stock Exchange in 1957.

The Scale of the Loss

The numbers tell the story plainly. Honda posted a net loss of $2.7 billion for the fiscal year, dragged down by more than $9 billion in restructuring charges and write-downs tied to the unwinding of its EV strategy.

It’s a stunning reversal for a company that has spent seven decades as one of Japan’s most reliable automakers. And it underscores just how badly Honda — along with many other carmakers that poured billions into electric vehicles — has been hit by cooling demand.

Honda’s chief executive, Toshihiro Mibe, didn’t shy away from the difficulty during a news conference in Tokyo. He acknowledged that the business environment and customer demand had shifted beyond the company’s expectations, and admitted that Honda had not been able to respond flexibly enough.

How Honda Got Here

To understand the loss, it helps to rewind five years.

Back then, Honda was racing to catch up with Tesla and Chinese rivals like BYD in the electric-car market. The company made a bold pledge: its entire lineup would be electric or hydrogen-powered by 2040. That was a far more aggressive transition than rivals like Toyota, which stayed cautious on fully electric cars and kept backing hybrids and gasoline models.

For Honda, the pivot was striking. This was a company long celebrated for its mastery of the internal combustion engine — the automaker that first broke into the U.S. market in the 1970s with low-cost vehicles built around some of the world’s most efficient engines.

Starting in 2021, Honda broke from its tradition of avoiding big strategic alliances. It began investing billions into battery-powered cars, both in-house and through partnerships with General Motors and Sony. For a while, the 2040 target drew praise from investors and environmental groups alike.

Why the Strategy Unraveled

The problem was that consumers weren’t ready to follow.

After an initial wave of early adopters propped up sales, mainstream buyers hesitated — largely over lingering concerns about charging infrastructure and high sticker prices. Then the policy ground shifted. Last year, federal subsidies for many electric models were effectively gutted under the Trump administration.

The market consequences were significant:

• In 2025, electric vehicle sales in the United States fell, ending a record-breaking five-year growth streak.
• The slowdown hit American manufacturers too — Ford said its electric-vehicle division lost $4.8 billion in 2025 and would likely keep losing money for at least two more years.
• Honda also faced pressure in China and Southeast Asia from an influx of low-cost Chinese vehicles, with its unit sales in Asia in 2025 down more than a fifth from the previous year.

Pulling Back the Plans

Honda has responded by significantly scaling back its EV ambitions.

In March, the company announced the cancellation of three major electric models originally bound for the North American market. An affordable line being developed with General Motors and a software-heavy vehicle co-developed with Sony have both been shelved.

Then, on Thursday, Mibe confirmed the biggest reversal of all: Honda is abandoning its 2040 target of selling only electric and hydrogen-powered cars. He explained that the target had been set based on the Biden administration’s environmental policies in the United States, Honda’s largest market. Over the past year, he said, there had been a drastic shift away from a focus on the environment — making the old target, in his words, no longer realistic.

The Path Forward: Betting on Hybrids

Rather than chasing a fully electric future, Honda is now doubling down on gasoline-electric hybrids.

The company plans to introduce 15 next-generation, high-efficiency hybrid models by 2030, including larger vehicles for the North American market. Combined with cost cuts and faster development, Honda hopes this push will restore the company to record profit levels by the end of the decade. It’s also forecasting a return to profitability as soon as this year.

Importantly, Honda isn’t walking away from electric vehicles entirely. Mibe said the company still intends to develop “highly competitive electric vehicles.” The new approach, he explained, is about laying technological groundwork while keeping greater flexibility and a wider range of options — so Honda is prepared to meet EV demand whenever it does materialize.

The Bottom Line

Honda’s first annual loss is more than a bad year on a balance sheet — it’s a milestone that captures the broader reckoning facing the auto industry. A company that bet big and early on going all-electric has been forced to confront a market that simply didn’t move as fast as projected. By pivoting back toward hybrids while keeping a foot in the EV door, Honda is wagering that flexibility, not commitment to a single technology, is the safer route through an unpredictable transition. Whether that bet pays off — and restores the record profits Mibe is promising — will become clear by the decade’s end.