Honda Motor reported developments on Friday that sent its shares sharply lower, as the Japanese automaker said costs tied to a cancelled electric vehicle program will push it into its first annual loss since it went public in the 1950s.
Shares of Honda Motor (TYO:7267) dropped as much as 6.7% to 1,351 yen, placing the stock among the poorest performers on the Nikkei 225 index, which fell by more than 1% during the same session.
The company said it will record a total charge of up to 2.5 trillion yen related to the cancellation of three EV models that it had planned to produce in the United States. That charge will be recognized across the current and the next fiscal year, the company said.
As a result of the charge, Honda now expects an annual loss of up to 630 billion yen for the current fiscal year. This marks a substantial revision from earlier guidance that projected a profit of 360 billion yen.
Honda attributed its revised outlook in part to a slowdown in the global electric vehicle market and to broader headwinds affecting the automobile industry.
In addition to the charge tied to the cancelled U.S. EV models, Honda said it will take a write-down on its China business. The company said it expects an impairment loss from that market as it contends with stronger competition from local EV firms.
Summary
Honda is preparing to book up to 2.5 trillion yen in charges after cancelling three EV models planned for the U.S., a move that has prompted the company to forecast its first annual loss since the 1950s and has led to a near 7% decline in its share price.
Key points
- Honda will record up to 2.5 trillion yen in charges related to cancelled U.S.-bound EV models, spread over the current and next fiscal year.
- The automaker now expects an annual loss of up to 630 billion yen, down from a previously forecast profit of 360 billion yen.
- Honda plans a write-down and expects an impairment loss for its China business amid intensified competition from local electric vehicle companies.
Risks and uncertainties
- Uncertainty in the global EV market - Honda cited a slowdown in demand for electric vehicles as a factor in its revised outlook.
- Operational and competitive pressures in China - the company expects an impairment loss as it faces stronger competition from local EV manufacturers.
- Broader automobile industry headwinds - Honda referenced wider sector challenges that contributed to the profit-to-loss revision.
These developments collectively fed investor concern and drove the share price decline seen on the Nikkei 225.