Honda warns of tougher year ahead as chip shortages

Honda has revised its profit predictions due to a reduction in demand for electric vehicles. Semiconductor chip export restrictions have also affected the production of electric vehicles, causing automakers like Honda to reconsider their long-term strategies. 

Honda Motor Co. has slashed its profit forecast for the year, blaming the ongoing semiconductor shortage and a slowdown in electric vehicle demand for its projected weaker performance. The Japanese carmaker said on Friday that it now expects an operating profit of ¥550 billion ($3.6 billion) for the fiscal year ending March 2026.

Honda has reduced its profit forecast

The revised figure is a significant reduction from the earlier forecast of ¥700 billion, and it is even more of a difference when compared to analyst expectations of ¥869 billion. Honda said the pressure of a constantly disrupted supply chain and the loss of demand for EVs have made the operating environment increasingly challenging.

The company reduced its global auto sales forecast to 3.34 million units from an earlier target of 3.62 million, due to weaker consumer demand in Asia and the production disruptions caused by Beijing’s export restrictions.

Honda previously reported suspending or halting operations at several North American plants after China blocked the semiconductor maker, Nexperia, from exporting chips from its facilities. The move has worsened the supply shortage, forcing the Japanese automaker to adjust production schedules across major markets.

A drop in EV demand

Honda now expects EVs to account for just 20% of its total sales, down from its earlier target of 30%. The automaker implicated the downward revision on growing caution among customers about electric vehicles due to high interest rates and diminishing government incentives to buy them.

President Donald Trump’s tariffs on imported cars and automotive parts have added new costs and uncertainty for foreign carmakers like Honda.

The company said it would halt the development of one EV model, although it didn’t name which. It also said some models will be discontinued, and those developed under a joint alliance will have their production scaled back. According to reports from The Nikkei, Honda is also delaying the launch of a new EV in China.

Despite these issues, Honda said it remains committed to its long-term electrification goals. However, the transition will now be more gradual, and the company will prioritize improving profitability. To achieve this, the company will launch a new platform focused on hybrid vehicles and large-sized hybrid systems aimed at vehicles from 2027 onward.

Honda’s motorcycle business achieved record sales volume and operating profit during the first half of the fiscal year, thanks to demand from India and Indonesia, where motorcycles are a popular and affordable mode of transportation.

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