Honda cuts outlook on global chip shortage, gloomy EV demand

The chip shortage and a slump in demand in Asia saw Honda reduce its global autos sales forecast to 3.34 million units from 3.62 million

Honda Motor Co. slashed its annual profit guidance as a shortage of critical semiconductors hurts production, with the Japanese carmaker also warning of a turbulent outlook for electric vehicles.

The carmaker sees ¥550 billion ($3.6 billion) in operating profit for the fiscal year ending March 2026, it said Friday. That’s down from a previous forecast of ¥700 billion and missed analyst expectations that Honda would lift the outlook to ¥869 billion.

The chip shortage and a slump in demand in Asia saw Honda reduce its global autos sales forecast to 3.34 million units from 3.62 million. The carmaker has previously said it’s curbed or suspended output at some of its North American plants after Beijing blocked Nexperia, which is based in the Netherlands but owned by a Chinese firm, from exporting from its facilities in China.

Read More: Dutch Ready to Drop Control of Nexperia If Chip Supply Resumes

Still, there are signs the supply crunch is easing. Honda has been told Nexperia’s chip shipments in China have resumed, and the carmaker aims to get disrupted production back on track during the week of Nov. 21, executive vice President Noriya Kaihara said.

“The downward revision to full-year guidance was large and somewhat surprising,” said Bloomberg Intelligence senior auto analyst Tatsuo Yoshida. “That said, the company may have lowered the bar by fully incorporating adverse factors and cut the full-year plan, leaving room for upward revisions.”

Beyond the near-term chip issues, Honda highlighted the longer-term hit it’s facing from a slowdown in EV demand. It now expects the ratio of EVs in its global sales to drop to 20% in 2030 from a previously announced target of 30%.

That’s in line with Honda’s previous warnings that it is scaling back investment plans and anticipating lower EV sales targets, particularly with the end of tax credits in the US. President Donald Trump’s tariffs on imports of cars and parts have also hurt the company’s outlook.

Honda also spoke to the challenges foreign automakers face in China, where they are losing ground to domestic rivals.

The Japanese marque has indefinitely postponed the further rollout of its Ye Series — an EV lineup geared for the Chinese market — after it found its price and software weren’t competitive enough. The Ye Series GT’s debut had been planed for the fiscal year ending March 2027.

“It has no cost competitiveness and, while other companies all have autonomous driving technology, we do not,” Kaihara said. Honda will work with China’s Momenta to implement those features in its vehicles.

The EV slowdown will see the carmaker stop the development of a model it didn’t identify, and it will discontinue and reduce the manufacturing of models jointly developed under a particular alliance agreement.

Honda’s motorcycle business continues to be a bright spot. The unit posted record sales volume and operating profit during the first half of the fiscal year, even as Vietnam weighed on volumes.