Honda's Nine-Month Profit Falls Sharply as US Policies Bite
Honda Motor Co. has announced a significant 42% decline in profit for the nine-month period ending December, compared to the same timeframe a year earlier. The Tokyo-based automaker attributed this downturn primarily to the impact of tariffs imposed by former US President Donald Trump and a notable slowdown in the electric vehicle market within the United States.
Financial Performance and Market Challenges
Honda's profit for the three quarters totalled 465.4 billion yen, equivalent to approximately $3 billion, a stark decrease from the 805.2 billion yen reported previously. This marks the second consecutive year of declining profits during this period for the manufacturer of popular models such as the Accord sedan, Civic compact, and Odyssey minivan.
Sales also experienced a slight dip, falling 2.2% to 15.98 trillion yen, or about $102.6 billion, from the previous year. Despite these challenges, Honda maintained its full fiscal year profit forecast at 300 billion yen, roughly $1.9 billion.
Electric Vehicle Strategy Adjustments
The company highlighted the cooling US electric vehicle market as a key negative factor affecting its results. In response, Honda has revised its global EV sales ratio projection for 2030 downward to 20%, a reduction from its earlier target of 30%. Additionally, the automaker confirmed it has cancelled the development of certain EV models, citing rapid changes in the EV landscape.
The Trump administration, which has shown support for the oil and gas industry, rolled back previous initiatives that promoted electric vehicle adoption under the Biden administration. These programs had aimed to encourage the use of environmentally cleaner cars and trucks.
Impact of Tariffs and Broader Economic Context
Last year, Trump reduced tariffs on automobiles and auto parts to 15% from an initial 25%, a move that still poses significant challenges for Japan's export-dependent economy, particularly its automotive sector. In a related development, Japan committed to investing $550 billion in US projects as part of broader economic discussions.
This tariff environment has adversely affected other Japanese automakers as well. Recently, Toyota Motor Corp., Japan's leading car manufacturer, reported a profit decline and announced a leadership change, with Chief Financial Officer Kenta Kon set to become its new chief executive and president.
Political Landscape and Market Reaction
On the political front, Prime Minister Sanae Takaichi, who assumed office in October as Japan's first female leader, secured a decisive parliamentary election victory for the governing Liberal Democratic Party over the weekend. This outcome is expected to facilitate the advancement of her party's policies, including efforts to stimulate growth through increased government spending in areas such as technology and defense.
Despite the profit downturn, Honda's stock saw a positive movement, rising 2.1% in Tuesday's trading session. The broader Nikkei 225 index also performed strongly, finishing 2.3% higher and setting a new record high for the second consecutive day. This rally was partly fueled by optimism surrounding Takaichi's popularity and her party's electoral success.
