What is the prospect for semiconductor procurement, and will the JPY 150 billion impact improve or worsen?

Management identified Nexperia as the supplier causing the impact, leading to a 110,000 unit production adjustment in North America and a JPY 150 billion operating profit impact. They expect shipments to resume in China and aim to restart North American production by the week of November 21, but acknowledged ongoing uncertainty. “As of now, we have an impact of 110,000 units that's reflected. And then I said JPY 250 billion, but operating profit of JPY 150 billion that is put up in this announcement today.”

Why did Honda suffer such a large semiconductor impact, are alternative parts being considered, and is the JPY 150 billion impact the maximum expected?

The large impact was due to single-sourcing of a component and full-capacity production in North America, which depleted interim inventory. Honda is actively seeking alternative parts and expects production to resume by November 21, but cannot guarantee no further impact if China shipments stop again. “First of all, so the reason why we have this much impact is this time, the components -- well, I cannot give you any details about the component, but the components was sourced from one supplier. That was one major factor.”

What are the specific reasons for the downward revision (EV expenses, North America pricing), and how does Honda plan to achieve zero gross losses for BEV?

Tariff impact was minimized, but EV one-time expenses increased. North America pricing was difficult due to rising OEM incentives, preventing anticipated price hikes. For BEV, the company aims to minimize losses from a JPY 400 billion range next year through cost reduction and efficient production, acknowledging the challenging market and heavy fixed costs at mass production start. “What has happened is that in North America, particularly in the U.S., other OEMs incentives have been getting higher. So the actual market selling price has not gone up in real terms.”

HMC

Honda Motor Co. (HMC) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Sep 2025 (Q2 FY26)· Consumer Discretionary· Nov 7, 2025

Source: earnings call transcript

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

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

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

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

Segment performance

Segment	Revenue	YoY	QoQ	Margin
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

Product announcements

Product	Type	Timeline
E-Series GT BEV	discontinuation	postponed indefinitely
ICON e and CUV e	launch	this year
New EV model (Thailand production)	roadmap	March/April next year
City (minor change)	update	next year

Risks & headwinds

Tariff impact Ongoing, 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 expenses FY26

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 shortage Q2 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 settlement Q2 FY26

JPY 20 billion

Group restructuring losses Q2 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 regulations Starting 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

Automobile profitability in Asia and China

Next quarter / Next year

Current ICE profitability worsened beyond expectations, JPY 72 billion operating losses for Automobiles in H1 FY26.

Target Improved 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.

Find out whether HMC delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 5 chapters

Detailed narrative

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.