An investment lost 67.9 billion yuan

Recently, Honda, an automotive giant, has released its worst financial report since going public.

The financial report shows that in the fiscal year 2025 (from April 2025 to March 2026), Honda incurred a net loss of 423.9 billion yen, approximately equivalent to 18.2 billion yuan, a year - on - year plunge of 150.72%. However, the core reason for this loss lies in Honda's global pure - electric strategy in the wave of electrification.

The announcement reveals that in 2022, Honda planned to invest 10 trillion yen, about 500 billion yuan, in the entire automotive industry chain defined by "electrification + software" within five years. However, this huge investment did not bring the expected returns. Instead, due to strategic mistakes in the pure - electric business, this giant had to swallow this "bitter pill".

A One - Time Write - off of 67.9 Billion for the "Pure - Electric Project"

Looking closely at this 18.2 - billion - yuan net loss, it is actually not the "full picture" of Honda's losses this time.

According to the plan, Honda's 10 - trillion - yen pure - electric strategy includes 6 trillion yen for vehicle manufacturing and development of pure - electric models; 2 trillion yen for research and development of intelligent cockpits and autonomous driving software; and 2 trillion yen for self - research of batteries, factory and supply - chain layout. However, this plan was urgently halted after only two years of implementation.

The core reason for the halt is that the demand for electric vehicles in North America fell short of expectations, the competition in the Chinese pure - electric market fully squeezed Honda, and the input - output ratio of the self - developed pure - electric platform was out of balance. The North American electric - vehicle project and the self - developed pure - electric platform are the most heavily invested projects in Honda's 10 - trillion - yen plan. As a result, along with the strategic mistakes, Honda will write off up to 2.5 trillion yen in asset impairments in the pure - electric business, approximately equivalent to 108 billion yuan.

In the fiscal year 2025, Honda has actually written off 1.5778 trillion yen, about 67.9 billion yuan, in asset impairment losses, which also dragged down Honda's performance in the fiscal year 2025. The reason why Honda only had a net loss of 18.2 billion yuan in this fiscal year is due to the profitability of its other businesses, such as fuel, hybrid, motorcycles, and finance. Especially, the motorcycle segment performed strongly, achieving a departmental profit of 731.9 billion yen.

However, these strong businesses still cannot make up for the losses caused by the layout mistakes in Honda's pure - electric business. The disclosure shows that in order to stop losses in time, Honda has significantly cut high - investment pure - electric projects, including terminating the development of three main models in the Honda0 series; indefinitely freezing the 11 - billion - dollar battery and vehicle factory in Canada; terminating all projects of Sony's Afeela high - end pure - electric vehicles; and canceling the hard targets of "20% of global sales being pure - electric by 2030 and fully pure - electric by 2040".

For this reason, Toshihiro Mibe, the president of Honda, also publicly apologized at the shareholders' meeting. He admitted that the previously set goal of "completely phasing out fuel - powered vehicles by 2040" has become "unrealistic" in the current market environment. In order to reverse the decline, Toshihiro Mibe announced that he will adjust resources in a timely manner and "bet" on the hybrid business again. The plan is to reduce costs by introducing local intelligent technologies and using local standardized components.

The "Loss" of Two External Markets in Succession

Actually, the failure of the global pure - electric strategy is only the internal cause of Honda's "blood loss" this time. The "loss" of two external markets has also made matters worse for Honda.

First is the North American market. As the most important profit base for Honda's automotive business, this market has been continuously squeezed by the high - pressure tariff policy of the United States. Previously, the United States had imposed tariffs on imported cars. Although there were subsequent adjustments, compared with the original basic tax rate of 2.5%, it still significantly increased Honda's export costs. At the same time, there is also considerable pressure on the transportation and tax - payment costs of Honda's vehicles exported from Japan and Southeast Asia to North America.

In the new financial report, Honda pointed out that the US tariff policy alone had a negative impact of 346.9 billion yen on Honda's operating profit.

Second is the Chinese market. In the topic of "Honda's huge loss", many netizens said that Honda's sales in China have been dropping sharply in recent years.

Data shows that Honda's sales in China have dropped from a peak of 1.627 million vehicles in 2020 to 645,300 vehicles in 2025, which means an overall decline of more than 60% in five years. Among them, in 2024, Honda's sales fell below the one - million mark for the first time, with only 852,300 vehicles sold. From January to May 2026, the decline further intensified. Honda's cumulative terminal sales in China were only 173,300 vehicles, a year - on - year decline of 32.47%.

Looking at monthly sales, the sales volume in April was only 22,600 vehicles, a year - on - year decline of 48.3%; in May, the sales volume was 28,300 vehicles, a year - on - year decline of 48.68%... The once "cash cow" has been retreating steadily in the Chinese market, with the decline approaching 50%.

Against this background, Toshihiro Mibe, the president of Honda, has also been impeached by a group of retired veterans, who accused him of an aggressive and market - detached pure - electric route and long - term neglect of the Chinese market. For example, problems such as absence from core domestic auto shows, slow product iteration, and insufficient decentralization of localization in China.

In response, Honda said that during the contraction period of the global pure - electric strategy, the original electrification commitments in the Chinese market will remain unchanged, and it will focus on retaining and increasing the pure - electric layout. That is, 10 pure - electric vehicles will be launched in China before 2027, and 100% of sales in the Chinese market will be pure - electric by 2035. In addition, the pure - electric production lines of GAC Honda and Dongfeng Honda will also operate normally.

The Collective "Lost" of Japanese Automakers

It's not just Honda. Looking at the entire Japanese auto industry in this industrial change, they are all collectively "lost".

Nissan, one of the three Japanese automotive giants, is the first to be affected. Its net loss in the fiscal year 2025 was as high as 533.1 billion yen, and the net loss in the previous fiscal year was 670.9 billion yen. The company has had deficits for two consecutive years.

Similarly, Toyota, the global sales champion, has not been able to stay out of it. In the fiscal year 2025, although Toyota maintained a profitable state, it was caught in the dilemma of "increasing revenue but not increasing profit". In the current period, Toyota's consolidated revenue reached a record high of 50.68 trillion yen, but its net profit attributable to the parent company decreased by 19.2% year - on - year to 3.85 trillion yen. And like Nissan, it has seen a decline in net profit for two consecutive years.

The operating conditions of second - tier automakers are also dismal. The net profits of Mazda, Subaru, Mitsubishi, etc. have shown a cliff - like decline, with the decline generally approaching or exceeding 70%. Among them, Mitsubishi's net profit in the fiscal year 2025 plummeted by 76% to 10 billion yen, equivalent to a net profit of 400 million yuan; Subaru's net profit in the fiscal year 2025 decreased by 73%, recording a net profit of 90.8 billion yen.

The superficial reason lies in the impact of high - pressure tariffs in North America and the continuous shrinkage of the Chinese market share. But the essential problem is that Japanese traditional automakers have difficulty adapting to the new competition rules in the new - energy era, and there have been serious deviations in their own electrification transformation rhythm and technology - route judgment.

In the era of fuel - powered vehicles, Japanese automakers opened up the global market and achieved "easy wins" in China by relying on mature internal - combustion engine platforms, stable engine technologies, and standardized global supply chains. However, in the new - energy era, this "effective" development logic is being fundamentally impacted.

When the penetration rate of new - energy vehicles in China exceeded 50%, Japanese automakers led by Honda misjudged the development focus, long - term neglected the Chinese market, and concentrated pure - electric resources in North America. After the wave of electrification, when domestic independent brands redefined cars with "intelligence", the era when Japanese automakers easily occupied the Chinese market with labels such as "fuel - efficient" and "durable" suddenly came to an end. And the moat of their long - cultivated fuel - powered vehicles is also gradually collapsing in this round of industrial wave.

Looking to the future, as industrial iteration continues to accelerate and industry competition rules are completely rewritten, whether the former industry leaders - Japanese automakers - can let go of their obsession with solidified technologies, adjust strategies in a timely manner, and make up for business shortcomings has become an important juncture for them to overcome this transformation pain and re - enter the forefront of the industry.

This article is from the WeChat official account "China Venture Capital". Author: Chen Mei, Editor: Wang Qingwu. Republished by 36Kr with authorization.