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Honda Battles Chinese EV Rivals and Supply Chain Woes, Cuts Profit Forecast
11 Nov
Summary
- Honda cuts full-year profit outlook by 20% due to EV costs, chip shortages
- Faces intensifying competition from Chinese EV makers in Southeast Asia
- Motorcycle division thriving, but automotive business in "dire situation"
As of November 11th, 2025, Honda Motor Co. is facing a multitude of challenges that have led the company to downgrade its full-year profit outlook by a fifth. The immediate pressures stem from U.S. tariffs and global chip shortages, but the deeper, longer-term concern lies in the intensifying competition from Chinese electric vehicle (EV) makers in the Asian market.
Honda has estimated a 385 billion yen ($2.6 billion) hit from U.S. tariffs, although this is less than the 450 billion yen originally flagged. The company also cited one-off EV costs and a shortage of components using chips from the Netherlands-based Nexperia, which the Dutch government took control of in late September 2025 after it was acquired by China's Wingtech.
However, the more pressing issue for Honda and other Japanese automakers is the steady erosion of market share in Southeast Asia, a region where they once dominated virtually unchallenged. The challenge goes beyond declining sales, as automakers are responding by ramping up incentives and cutting prices to attract buyers, leading to leaner profits on new sales.
Competition from Chinese EV makers such as BYD is becoming increasingly difficult for Japan's automakers across Southeast Asia, including Thailand and Indonesia. Honda's retail sales have plunged nearly 30% in Indonesia, 18% in Malaysia, and 12% in Thailand over the first nine months of 2025 compared to the same period last year. The company has no new models planned for the region from this fiscal year into the next, which could risk ceding more ground to Chinese manufacturers.
While Honda is turning to India, a market that remains largely closed to Chinese EV makers, the company's automotive division has reported an operating loss for the third straight quarter, lagging behind the performance of its motorcycle division, which delivered record profits. Experts suggest that Honda may need to consider splitting its four-wheel and two-wheel businesses to address this "unbalanced" profitability gap.
Overall, Honda has lowered its forecast for this fiscal year's vehicle sales to 3.34 million, down from 3.62 million expected previously, including a 110,000-unit reduction attributed to decreased production caused by the chip supply shortage from Nexperia.
