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    HMC
    Earnings call· Sep 2025(Q2 FY26)

    HONDA MOTOR CO LTD HMC

    Nov 7, 2025 Source

    Executive summary

    Honda Motor Co., Ltd. Q2 FY26 — Record Motorcycle Profit Amid Automobile Losses and Semiconductor Headwinds

    Honda's Q2 FY26 results were marked by record performance in Motorcycle operations, driven by strong global sales, while Automobile operations faced significant headwinds including JPY 72 billion in operating losses due to tariffs, EV-related one-time expenses, and semiconductor shortages. The company revised down its full-year profit and automobile unit sales forecasts, emphasizing a need for fundamental restructuring in its automobile business, particularly in Asia and China, and a focus on cost reduction for BEVs.

    Highlights

    3

    • Motorcycle operations achieved record high unit sales, operating profit, and operating margin for the first half.

    • Operating cash flow after R&D adjustment came to JPY 1,281.3 billion, on par with the same period last year.

    • Yen depreciation is expected to contribute JPY 88 billion positively to full-year operating profit compared to previous forecast.

    Concerns

    5

    • Automobile operations recorded JPY 72 billion in operating losses for the 6 months to Q2 FY26.

    • Full-year FY26 operating profit forecast was revised down by JPY 150 billion to JPY 550 billion.

    • Automobile unit sales forecast for FY26 was revised down from 3.62 million to 3.34 million units.

    • EV-related and one-time expenses negatively impacted Q2 operating profit by JPY 223.7 billion.

    • Tariff impact led to a profit decline of JPY 164.3 billion in Q2 operating profit.

    Guidance & targets

    7
    CategoryTargetConfidence
    Full-year FY26 Operating Profit
    JPY 550 billion
    high materiality
    Medium
    Full-year FY26 Profit attributable to owner of parent
    JPY 300 billion
    high materiality
    Medium
    Full-year FY26 Motorcycle unit sales
    21.3 million units
    medium materiality
    Medium
    Full-year FY26 Automobile unit sales
    3.34 million units
    high materiality
    Medium
    Full-year FY26 Power Products unit sales
    3.67 million units
    low materiality
    Medium
    Full-year FY26 Dividend per share
    JPY 70
    medium materiality
    High
    Full-year FY26 USD/JPY Exchange Rate Assumption
    JPY 145
    medium materiality
    High

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Motorcycle operations
    Achieved record high unit sales, operating profit, and operating margin for the first half, despite a decline in Vietnam, offset by growth in Brazil and the Philippines.
    Unit sales (6 months to Q2): 10.763 million unitsSales impact: JPY 60.2 billion increase (additional sales volume mainly in Asia and South America)Price and cost impact: JPY 32.3 billion increase (effective price revisions)Expenses: JPY 7 billion declineR&D: JPY 3.5 billion positiveForeign currency: JPY 41.3 billion declineTariffs: JPY 5.3 billion decline
    		—+JPY 42.4 billion—JPY 368.2 billion
    Automobile operations
    Recorded significant operating losses due to tariffs, EV-related one-time expenses, and lower sales in China and ASEAN. Management expressed a 'keen sense of crisis' and plans fundamental changes.
    Unit sales (6 months to Q2): 1.68 million unitsSales impact: JPY 24.5 billion decline (restructuring of group companies)Price cost impact: JPY 130 billion increase (effective price revisions)Expenses: JPY 33.8 billion increaseResearch and development: JPY 24.4 billion declineForeign currency effect: JPY 64 billion declineOnetime EV-related expenses: JPY 223.7 billion declineTariff impact: JPY 158.1 billion decline
    		—-JPY 351 billion—JPY 72 billion operating losses
    Financial Services
    Contributed positively to overall profit.
    		———JPY 143.2 billion
    Power Products and other businesses
    Experienced declines in Asia, but growth in Europe led to overall unit sales of 1.699 million units for the first half.
    Unit sales (6 months to Q2): 1.699 million units
    		———JPY 200 billion operating losses

    Operational metrics

    30
    Operating profit
    JPY 438.1 billiondown JPY 304.4 billion YoY
    Q2 FY26

    Consolidated operating profit for the 6 months to Q2 FY26.

    Investment earnings (equity method)
    JPY 10.8 billionup JPY 31.6 billion
    Q2 FY26

    For the 6 months to Q2 FY26.

    Profit attributable to owner of parent
    JPY 311.8 billiondown JPY 182.8 billion
    Q2 FY26

    For the 6 months to Q2 FY26.

    Net cash balance
    JPY 3,053.9 billion
    End of H1 FY26

    Balance at the end of the first half.

    Operating profit (excluding EV-related one-time expenses and tariff impact)
    JPY 826.2 billionon par with same period last year
    Q2 FY26

    Trial calculation, corrected from JPY 836.2 billion.

    Underlying operating profit (excluding one-time costs)
    JPY 890 billion
    Q2 FY26

    Calculated by adding back JPY 450 billion of 'noise' factors to the reported JPY 438.1 billion operating profit.

    Initial full-year operating profit target
    JPY 500 billion
    FY26

    Target mentioned at the beginning of the fiscal year.

    Previous fiscal year operating profit
    JPY 1.4 trillion
    FY25

    Reference point for full-year operating profit discussion.

    Implied full-year operating profit (current forecast)
    JPY 1.3 trillion
    FY26

    Derived from the JPY 550 billion target after considering FX, semiconductors, and tariffs.

    BEV loss estimate (initial)
    JPY 600 billion negative
    FY26

    Initial estimate for battery EV losses.

    BEV loss estimate (with provision)
    JPY 650 billion
    FY26

    Includes a JPY 50 billion provision.

    Net tariff impact (previous forecast)
    JPY 350 billion
    FY26

    As per previous guidance.

    Gross tariff impact (current forecast)
    JPY 385 billion
    FY26

    Current full-year forecast.

    Recovery from tariff impact (current forecast)
    JPY 150 billion
    FY26

    Current full-year forecast.

    Net tariff impact (current forecast)
    JPY 335 billion
    FY26

    Current full-year forecast.

    Operating profit (H1 FY26)
    JPY 440 billion
    H1 FY26

    Rounded figure used in discussion of H1 vs H2 difference.

    Operating profit (H2 FY26 forecast)
    JPY 110 billion
    H2 FY26

    Implied from H1 operating profit and the JPY 320 billion difference between H1 and H2.

    Operating profit difference (H1 vs H2 FY26)
    JPY 320 billion
    FY26

    Difference between first half and second half operating profit.

    Substantial operating profit difference (H1 vs H2 FY26, excluding FX/one-time)
    JPY 290 billion
    FY26

    Difference after accounting for semiconductor and one-time expenses offsetting each other, and JPY 40 billion FX impact.

    EV-related one-time expenses (provision)
    JPY 250 billion
    FY26

    Provision for losses allocated throughout the year, with JPY 225 billion allocated to the first half.

    Group restructuring losses
    JPY 43 billion
    Q2 FY26

    Losses from the transfer of a subsidiary.

    Litigation settlement
    JPY 20 billion
    Q2 FY26

    Settlement for litigation in financial operations.

    Total negative impact from external factors
    JPY 450 billion
    Q2 FY26

    Sum of 'noise' factors impacting operating profit.

    Automobile segment profit/loss
    losses
    FY26

    Expected to end the fiscal year in losses.

    Motorcycle segment profit
    JPY 600-700 billionsame as last year
    FY26

    Expected full-year profit.

    Finance segment profit
    JPY 300 billionsame as last year
    FY26

    Expected full-year profit.

    Total Motorcycle and Finance profit
    JPY 1 trillion
    FY26

    Combined expected full-year profit for these segments.

    BEV losses (next business year starting point)
    JPY 400 billion range
    Next business year

    Expected starting level for BEV losses in the next fiscal year.

    Automobile unit sales decline (North America)
    110,000 units
    FY26

    Volume reduction due to semiconductor shortages.

    Automobile unit sales decline (ASEAN regions)
    750,000 unitsless than first forecast
    FY26

    Significant reduction compared to the initial forecast, impacting Indonesia, Thailand, and Malaysia.

    Industry KPIs

    5
    MetricValueDetails
    Average transaction price—
    Autonomous robotaxi metrics—
    Regional segment EBIT marginJPY 72 billion operating losses (Automobiles); JPY 368.2 billion operating profit (Motorcycles); JPY 143.2 billion operating profit (Financial Services); JPY 200 billion operating losses (Power Products and other)JPY
    Vehicle deliveries wholesales1.68 million units (Automobiles); 10.763 million units (Motorcycles); 1.699 million units (Power Products)units
    Ev unit volumes mix segment economicsJPY 223.7 billion negative impact (Q2 operating profit); JPY 250 billion provision (FY26); JPY 650 billion losses (FY26 estimate); JPY 400 billion range losses (next business year starting point)JPY

    Product announcements

    4
    ProductTypeDetails
    E-Series GT BEVdiscontinuation
    ICON e and CUV elaunch
    New EV model (Thailand production)roadmap
    City (minor change)update

    Risks & headwinds

    9
    Tariff impactOngoing, considered 'new normal'

    JPY 164.3 billion negative impact on Q2 operating profit; JPY 385 billion gross impact for full year FY26; net impact JPY 335 billion for FY26.

    Mitigation: Policy of 'produce where there is demand' and supply chain adjustments to combat impact; scrutinizing impact and recovery.

    EV-related one-time expensesFY26

    JPY 223.7 billion negative impact on Q2 operating profit; JPY 250 billion provision for full year FY26.

    Mitigation: Provision for losses has been allocated; focus on curbing future BEV losses through cost reduction and efficient production.

    Semiconductor shortageQ2 FY26, expected to resume by week of November 21

    JPY 150 billion negative impact on full-year operating profit; 110,000 units production adjustment in North America.

    Mitigation: Working with Tier 1 manufacturers to minimize impact; seeking alternative parts; expecting production resumption by mid-November.

    Automobile sales decline (China/ASEAN)Ongoing

    Automobile unit sales forecast revised down by 280,000 units for FY26; ASEAN unit sales down 750,000 units vs. initial forecast.

    Mitigation: Fundamental changes in actions for Asia/China, including reviewing product lineups, focusing on profitable models, rationalizing fixed expenses, and enhancing BEV competitiveness through local procurement and features.

    Increased OEM incentives (North America)Q2 FY26 and expected for H2 FY26

    Prevented Honda from raising prices as anticipated, impacting profitability.

    Mitigation: Evaluating market situation; difficult to raise prices easily due to competitor actions.

    Litigation settlementQ2 FY26

    JPY 20 billion

    Group restructuring lossesQ2 FY26

    JPY 43 billion

    Chinese market competition (BEV)Ongoing

    Honda's BEVs considered 'pricey' and lack features like NOA compared to competitors.

    Mitigation: Postponing E-Series GT BEV launch for review; strengthening intelligence and cost competitiveness through local procurement and adding autopilot systems.

    Vietnamese ICE motorcycle regulationsStarting mid-next year (potential implementation)

    Caused sales decline in Vietnam, though business is slightly recovering.

    Mitigation: Launching EV models (ICON e, CUV e) and accelerating production of new EV model in Thailand for Vietnam market.

    What to watch in Q3 FY26

    5

    Automobile profitability in Asia and China

    Next quarter / Next year
    CurrentICE profitability worsened beyond expectations, JPY 72 billion operating losses for Automobiles in H1 FY26.
    TargetImproved profitability, evidence of effective restructuring and product lineup revisions.

    Why it matters

    Critical for overall Automobile segment recovery and long-term sustainability in key growth markets.

    Particularly in Asia, the profitability in the ICE worsened beyond our expectations. So we would need some fundamental changes in actions for those.

    Q&A highlights

    6

    Given record Motorcycle profit and JPY 73 billion Automobile losses, what is the outlook for the Automobile business, considering tariffs and semiconductor impact?

    Management explained that the JPY 73 billion Automobile loss was due to JPY 450 billion in 'noise' factors (tariffs, EV provisions, restructuring, litigation). Excluding these, underlying performance was better. They outlined plans to reboost ICE profitability, curb BEV losses, and address tariffs through localization, acknowledging a 'keen sense of crisis' for Automobiles.

    “This JPY 450 billion negative, as introduced in the material, we have JPY 160 billion due to tariffs and then the EV provision for losses, we will allocate JPY 250 billion throughout the year. So we have put it in the budget. And then of that, we allocated JPY 225 billion of that into the first half.”

    asked by Rina Ukita · answered by Eiji Fujimura

    2 min read5 chapters

    Detailed Narrative

    01

    Automobile Profitability Challenges and Restructuring Plans

    Management expressed a 'keen sense of crisis' regarding Automobile profitability, particularly in Asia and China, where ICE profitability worsened beyond expectations. They plan fundamental changes including reviewing product lineups, focusing on profitable models, rationalizing fixed expenses, and curbing BEV losses. The company aims to reboost ICE profitability to generate cash for future investments in BEV and intelligence technologies, while also rationalizing fixed expenses and optimizing manpower.

    02

    China Market Struggles and BEV Strategy

    Honda is struggling in the Chinese market due to intense price competition for ICE vehicles and a lack of advanced features like NOA (navigate on autopilot) in their BEVs, making them less competitive on price and features. The launch of the E-Series GT BEV has been postponed to allow for a complete review and planning from the initial stages. The company plans to strengthen BEV competitiveness through local procurement and by adding advanced driving systems as soon as they can be obtained locally.

    03

    ASEAN Market Decline and Competitive Landscape

    Automobile unit sales in ASEAN regions are expected to be down by 750,000 units compared to the initial forecast, primarily in Indonesia, Thailand, and Malaysia. This decline is attributed to government policies, market shrinkage, and intense competition, including from emerging Chinese products. Honda acknowledges losing price competitiveness and plans radical measures, including leveraging new model launches like the City minor change next year, to regain market share.

    04

    Semiconductor Shortage Impact and Recovery

    A specific component sourced from a single supplier (Nexperia) caused a significant production adjustment in North America, impacting 110,000 units and JPY 150 billion in operating profit. The issue was exacerbated by single-sourcing and full-capacity production. While shipments have resumed in China, Honda expects production in North America to resume around the week of November 21, actively seeking alternative parts to minimize further impact.

    05

    Tariff Impact as a 'New Normal'

    Tariffs are considered a 'new normal' and are expected to continue impacting profitability, with a gross impact of JPY 385 billion for the full year FY26. Honda aims to combat this through a 'produce where there is demand' policy and supply chain adjustments to improve profitability, particularly for Automobiles. The company is scrutinizing the impact and recovery from tariffs, with a net impact of JPY 335 billion for the full year.

    AI-generated summary of the company’s earnings call. Not investment advice.