Honda Is Losing Everything: The $65 Billion Mistake

Executive summary

Honda’s crisis is presented as a strategic miscalculation: at the peak of its financial and product success, the company committed heavily to an all-electric future while its strongest near-term business remained gasoline and hybrid vehicles. Honda’s EV plans proved costly and slow to deliver, while Chinese competitors gained ground with lower-priced vehicles, software-rich products, and faster model cycles. The company has since canceled major EV programs and refocused on hybrids, but it continues to face challenges in China, trade, and global competition.

Strategy and execution

• Large EV commitment: In May 2024, Honda announced plans to invest about $65 billion in EVs, batteries, and software by the end of the decade, doubling its previous plan. It targeted more than 2 million EV sales annually by 2030 and had earlier pledged that all new vehicles would be electric or fuel-cell vehicles by 2040.
• Infrastructure built ahead of proven demand: Honda committed $700 million to retool Ohio plants, partnered with LG on a battery factory valued at up to $4.4 billion, and announced an approximately $11 billion Canadian EV supply chain. It also established Sony Honda Mobility to develop the $89,900 Afeela.
• Slow and costly product development: The Honda e sold only about 12,500 units worldwide before production ended in January 2024. The Prologue, Honda’s first major U.S. electric SUV, was developed with GM and used GM’s battery platform and factory.
• Partnership strategy faltered: Honda and GM abandoned a 2022 plan to develop affordable EVs together after about 18 months. A proposed Honda–Nissan merger also collapsed in February 2025 after Honda sought a parent–subsidiary structure and Nissan rejected the terms.
• EV program cancellations: In March 2026, Honda canceled the Zero SUV, Zero Saloon, and Acura RSX, all planned for Ohio and months from production. Honda said EV demand had fallen and that it could not match newer competitors on value.
• Strategic pivot back to hybrids: Honda withdrew its 2030 EV target and 2040 all-electric commitment. Its new plan calls for 15 hybrid models by March 2030, with a global rollout of its next-generation hybrid system beginning in 2027.

Market and operating performance

• Record results before the downturn: In 2024, U.S. buyers purchased 402,791 CR-Vs and 242,005 Civics, with the Civic outselling the Toyota Corolla. For the year to March 2024, Honda reported operating profit above $9 billion, up 77% and a company record. The video attributes much of this strength to hybrids, not EVs.
• China became a major weakness: Honda’s China sales fell from 1.627 million vehicles in 2020 to 645,300 in 2025, down more than 60% from the peak. The video also cites April 2026 sales of 22,595, down 48% year over year.
  • Chinese EV and plug-in hybrid makers, particularly BYD, competed with lower prices, frequent feature updates, and faster model cycles.
  • Honda’s China factories built about 680,000 vehicles in 2025, against capacity of roughly 1.2 million. The video reports planned capacity reductions of around 40%, alongside workforce reductions and potential plant shutdowns.
  • Japanese brands’ combined share of China’s market fell from about 25% in 2020 to 10% in 2025.
• Financial cost of the EV retreat: For the year to March 2026, Honda reported an operating loss of about $2.6 billion and a net loss of about $2.7 billion, compared with roughly $5.3 billion in net profit the prior year. The video cites around $10 billion in EV-related losses, including approximately $3.3 billion in asset impairments and $2.1 billion in written-off development spending, with more than $3 billion of further EV costs expected.
• Recovery in the legacy business: Excluding EV losses, the video says Honda’s operating profit was about $6.6 billion. Operating profit then rose 117% in the April–June 2026 quarter. In August, Honda raised its full-year forecast to about $4.2 billion in operating profit on revenue above $155 billion.
• Demand and policy risks: The U.S. EV tax credit ended in September 2025, and tariffs affected vehicles and parts made in Canada and Mexico. Honda moved some CR-V production from Canada to Ohio. The video says Honda sold 932 Preludes in December 2025, down 88% year over year, and cites the Prologue being discontinued after the 2026 model year.

Frameworks, processes, and business lessons

• Portfolio and scenario planning: Honda’s commitment to a single long-term technology path left it exposed when EV demand, incentives, and trade conditions changed. Toyota’s continued hybrid investment is presented as a contrasting hedge.
• Build–partner–buy decisions: Honda’s experience illustrates the risks of relying on partners for core product capabilities, as with the GM-based Prologue. It also shows that partnerships do not guarantee speed or attractive economics.
• Product-market fit before scaling: The Honda e’s limited range and high price, and the Afeela’s premium positioning, highlight the need to validate customer demand, price, and product differentiation before committing to large-scale manufacturing investment.
• Development-cycle speed as an operating capability: Chinese competitors’ frequent model, price, and feature changes contrasted with Honda’s slower, multi-year cycles. The video frames responsiveness—not just engineering quality—as a competitive requirement.
• Capacity and capital discipline: Honda’s investments in factories and supply chains preceded demonstrated demand. Underused Chinese capacity and canceled Ohio programs show the cost of aligning fixed assets to an optimistic forecast.
• Protect the profitable core while funding transition: Honda’s hybrids and established models sustained earnings while EV investments generated losses. The video’s central strategic question is not whether EVs matter, but whether Honda chose the right pace and execution model.
• Organizational accountability: CEO Toshihiro Mibe took a 30% pay cut for three months after the results. The video also reports that some current and former executives sought his resignation, while the board retained him to lead the recovery.

Concrete strategic direction and risks

• Honda is betting on 15 new hybrid models by 2030, including larger vehicles previously intended to go electric.
• The Afeela remains a significant U.S. EV test: first deliveries were scheduled for California in late 2026, with Arizona and Japan to follow in 2027. Its $89,900 price, modest range (as characterized by a reviewer in the video), and premium entertainment-focused design create commercial risk.
• Honda signed a vehicle-supply agreement with Mitsubishi in October 2026, emphasizing cooperation on specific products rather than another attempted merger.
• Competition is spreading beyond China. In Thailand, the video cites Japanese brands’ share falling from roughly 80–90% during the 2010s to 68% in 2025, while Chinese brands grew from about 4% in 2021 to more than 22% in 2025.

Presenters and sources

The video is narrated by MAXIMUS; no individual narrator is identified. It includes remarks from Honda CEO Toshihiro Mibe, Honda and Toyota representatives, and an EV reviewer. It also cites Reuters, local Chinese and Japanese media, company announcements, and government or public-official statements.