This Legacy Japanese Automaker Is on the Brink of Survival

In May 2026, Honda Motor released financial results that shook the global automotive industry: a net loss of 423.9 billion yen (approximately RMB 18.2 billion) for fiscal year 2025. This marks the brand's first annual loss since its listing in 1957, breaking a 69-year streak of profitability.

Just one year prior, Honda Motor had achieved a net profit exceeding 800 billion yen. This stark contrast in performance has laid bare the survival dilemmas facing this Japanese giant.

Honda Motor's collapse is not an isolated case. In 2025, Nissan Motor recorded a massive loss of 533.1 billion yen, remaining deeply mired in deficits for two consecutive years. Seven major Japanese automakers, including Toyota, Suzuki, Mazda, Subaru, and Mitsubishi, simultaneously lowered their profit forecasts for fiscal year 2026. The combined estimated net profit for these seven companies is 3.9 trillion yen, nearly half of the industry's peak of 7.54 trillion yen in fiscal year 2023, representing a 48% decline.

Why have Japanese automakers, which once dominated the globe through lean manufacturing and hybrid technology in the fuel era, collectively stalled in the electrification age? "We have reached the brink of survival," lamented Toshihiro Mibe, President of Honda Motor, at the earnings press conference.

Behind the shattering of Honda Motor's 69-year profit record lies a systemic issue within the entire Japanese automotive industry.

The Costly Price of Aggressive Electrification Trial and Error

A close examination of Honda Motor's complete financial statements for fiscal year 2025 reveals that while revenue remained stable at 21.8 trillion yen, a slight year-on-year increase of 0.5%, sales volume did not experience a cliff-like drop.

What truly crushed profits was an asset impairment charge for electrification assets that exceeded market expectations.

Back in 2021, when Toshihiro Mibe had just assumed the role of President of Honda Motor, he unveiled an ambitious electrification blueprint: investing 10 trillion yen to layout pure electric vehicle (EV) and battery supply chains, with the ultimate goal of ceasing global sales of fuel vehicles by 2040.

Additionally, Mibe simultaneously advanced three major product lines: the North American "0 Series" pure electric models, Acura pure electric sports cars, and the Sony joint venture electric brand Afeela, attempting to overtake competitors in the pure electric transition in the two core markets of North America and China.

To implement this plan, Honda Motor built dedicated EV supply chains in Canada, established two new energy-exclusive factories in Guangzhou and Wuhan, China, and launched batch EV models based on the e:N pure electric platform.

In just three years, electrification became Honda Motor's highest-priority internal strategy, with company-wide resources tilted towards research and development of the "three electrics" (battery, motor, and electronic control).

However, market reality repeatedly poured cold water on these ambitions. Policy shifts in the North American market saw the U.S. terminate EV purchase subsidies and raise tariffs on imported complete vehicles to 15%, causing rapid shrinkage in demand for pure electric models. Competition in the Chinese market became fully heated, with domestic brands like BYD, Li Auto, and XPeng forming crushing advantages through complete supply chains, smart cockpits, and advanced intelligent driving capabilities.

Against this backdrop, annual sales of Honda Motor's e:N series EVs fell short of 20,000 units. Product range, infotainment systems, and autonomous driving capabilities lagged comprehensively behind domestic counterparts in the same class, yet pricing remained high. Continuous price cuts at the terminal level failed to boost sales.

In April 2026, Toshihiro Mibe personally visited Shanghai to inspect China's new energy supply chain. After visiting complete vehicle factories and battery supporting enterprises, he admitted to his entourage: "Facing such strength, we have no chance of winning."

Subsequently, Honda Motor rapidly introduced an aggressive stop-loss plan: completely halting the development of the North American 0 Series SUVs, sedans, and Acura pure electric models; shelving the Sony electric project; abandoning the 2040 goal of completely stopping fuel vehicle sales; and re-establishing hybrid models as the core of short-term growth.

This strategic emergency brake resulted in a massive asset impairment of 2.5 trillion yen, directly pushing Honda Motor into its first annual loss since listing. Beyond the core drag of electrification trial and error, multiple bearish factors 叠加， including declining sales in two core markets, rising raw material costs, and the impact of U.S. tariffs, further amplified the scale of the loss.

In the Chinese market, Honda Motor's total sales in 2025 were 645,300 units, shrinking by more than 60% from the historical peak of 1.627 million units in 2020, marking five consecutive years of sales decline. In the North American market, tariff policies caused an operating profit loss of 346 billion yen.

At the earnings press conference, Mibe admitted to serious misjudgments regarding the pace of the global electrification market and the strength of competitors. "We underestimated the complete ecosystem of China's new energy industry and overestimated the long-term demand for the North American pure electric market. Our blind expansion of the electric product line ultimately exacted a heavy financial toll."

On a positive note, despite recording a huge loss, Honda Motor's cash flow does not face a risk of rupture. As of the end of the fiscal year, its net cash flow from operating activities remained as high as 1.13 trillion yen, and reserves of cash and cash equivalents increased to 5.12 trillion yen.

Seven Major Automakers Collectively Lower Expectations

The collapse of Honda Motor's profitability is a visible result of the systemic crisis in the Japanese automotive industry. Toyota, Nissan Motor, Suzuki, Mazda, Subaru, and Mitsubishi, the seven major Japanese automakers, simultaneously lowered their profit forecasts for fiscal year 2026.

Specifically, the North American market has been the core profit pool for Japanese automakers for decades. For Toyota, Honda Motor, Subaru, and Mazda, North American revenue accounts for more than 30% of their global total revenue, with fuel SUVs and mid-size sedans long contributing more than half of the per-vehicle profit.

In 2025, the United States introduced new tariff policies on imported complete vehicles, raising the base tariff on Japanese imported cars from 2.5% to 15%. Although some models were exempted after multiple rounds of negotiations, the vast majority of Japanese imported models still need to bear additional tariff costs.

Toyota's financial data shows that the U.S. tariff policy in fiscal year 2025 directly caused an operating profit loss of 1.38 trillion yen; during the same period, Honda Motor lost 346 billion yen.

Furthermore, global geopolitical conflicts have triggered chain supply chain crises. Shipping in the Strait of Hormuz was obstructed, international crude oil prices continued to rise, and prices for core automotive component raw materials such as steel, aluminum, lithium-cobalt-nickel battery materials, rubber, and plastics rose across the board.

Internal calculations by Toyota indicate that raw material price increases in fiscal year 2026 will directly consume 400 billion yen in operating profit. With rubber prices rising by 78% and the cost of automotive plastic components increasing by 45%, complete vehicle manufacturing costs were passively elevated. Meanwhile, price wars in the terminal market continued, preventing automakers from synchronously raising terminal selling prices, thereby squeezing gross margin space from both sides.

As the world's largest automotive consumer market, the continuous decline in the share of Japanese cars in China has also become a significant factor.

In 2020, the peak market share of Japanese brands in China reached 23.1%. By 2025, this figure had fallen below the 10% survival threshold.

On one hand, in the fuel vehicle segment, as domestic brands continuously upgraded their models, fuel consumption, space, and configuration comprehensively surpassed Japanese sedans and SUVs in the same class, forcing Japanese cars to significantly reduce prices to maintain sales volume.

According to market visits, the price of Honda Motor's long-standing model, the CR-V, fell from 210,000 yuan to less than 90,000 yuan. In the sedan segment, the bare car price of the B-segment Honda Accord dropped to the 120,000 yuan range.

The gap in the new energy sector is even more pronounced. Monthly sales of pure electric models from Honda Motor, Toyota, and Nissan Motor are generally less than 1,000 units, a world of difference compared to BYD's monthly sales scale of 300,000 units.

The collapse in the Chinese market has directly impacted the global sales and profits of Japanese automakers. Honda Motor's global sales in fiscal year 2025 decreased by 329,000 units, with a reduction of 199,000 units in the Chinese market, accounting for more than half of the total global reduction. Nissan Motor's market share in China fell from 7% to 3.8%.

Advantages of the Fuel Era Become Heavy Burdens in Electrification Transition

Japanese automakers once dominated the global automotive market relying on hybrid technology, engine manufacturing, and lean production systems. However, this underlying logic that supported the glory of the fuel era is beginning to fail in the electrification and intelligence tracks, with long-formed technological path dependencies becoming shackles hindering transformation.

The energy route choices of Japanese automakers are rooted in their national resource endowments. Based on energy security considerations, Toyota and Honda Motor tilted their R&D resources towards hybrids and hydrogen energy over the past two decades. Toyota deeply cultivated the THS hybrid system and invested trillions of yen in laying out the Mirai hydrogen fuel cell vehicle.

However, the reality of industry development has deviated from the predictions of Japanese automakers. Markets such as China have fully embraced pure electric models, with battery technology iterating rapidly. "In contrast, Japanese automakers have slow iteration of pure electric products. Oil-to-electricity platforms inherently have defects in space and range, and the implementation of dedicated pure electric platforms lags behind the industry by more than five years," analyzed an executive from a joint venture automaker.

Nissan Motor, the earliest Japanese automaker to layout pure electric vehicles, launched the Leaf pure electric model in 2010, once leading the global pure electric market. However, product iteration stagnated in the following decade, with the new Ariya launching already two generations behind domestic counterparts in the same class.

The aforementioned joint venture executive also mentioned that the Japanese automotive industry has formed a closed supply chain ecosystem bound for decades, with cross-shareholding between complete vehicle manufacturers and parts suppliers, forming a stable community of interests.

He stated that in the fuel vehicle era, engines, transmissions, and chassis components were the core sources of value for complete vehicles, with related parts enterprises contributing significant revenue and profit to the industry. In the electrification era, motors, batteries, and electronic controls have replaced engines and transmissions as core components. The business scale and profits of traditional parts enterprises have shrunk significantly, creating a natural resistance to electrification transformation within the industry.

"The huge structure of vested interests has made the efficiency of transformation decision-making within Japanese automakers extremely low. The cycle for initiating, developing, and implementing a new pure electric model generally takes 4-5 years, whereas the development cycle for new models by Chinese domestic brands is only 18-24 months," said the joint venture executive.

Beyond electrification, intelligence and software capabilities have become the core competitiveness of automobiles today. Smart cockpits, advanced autonomous driving, and continuous OTA iteration capabilities for the whole vehicle have become core considerations for consumers when purchasing cars. This is also a core shortcoming of Japanese automakers.

Currently, the R&D expenditure of domestic new energy automakers generally accounts for more than 8% of revenue, while the R&D investment of Toyota, Honda Motor, and Nissan Motor accounts for less than 4% of revenue, with most R&D resources tilted towards traditional hardware such as engines and hybrid systems.

Faced with the survival crisis of collective losses and continuous decline in market share, the seven major Japanese automakers have successively introduced self-rescue plans.

After the huge loss, Honda Motor quickly adjusted its electrification strategy, suspending global pure electric expansion plans, making hybrid models the core growth driver for the next three years, re-optimizing its product matrix in the Chinese market, planning to launch new electric vehicles relying on the electric platforms of local partners, contracting North American pure electric business, reducing short-term R&D investment in electrification, and prioritizing the repair of corporate cash flow and profitability levels.

In terms of cost control, Honda Motor President Toshihiro Mibe and Executive Vice President Noriaki Aihara announced they would voluntarily return 30% of their monthly salaries for three months, while other senior executives would also take a 20% pay cut.

Nissan Motor launched the "Re:Nissan" restructuring plan, aiming to stop losses by cutting 20,000 jobs within two years, selling its headquarters building, reducing its global model lineup, and closing redundant factories through large-scale cost reductions.

Regarding the Chinese market, Honda Motor plans to enhance its product and cost competitiveness by utilizing standard parts sourced locally in China and local next-generation technologies, as well as introducing new energy vehicles built on platforms provided by local partners.

At this year's Beijing Auto Show, Dongfeng Nissan brought the NX8 hybrid version, equipped with a new generation hybrid system jointly developed by Dongfeng Motor and Sunwoda. Additionally, GAC Toyota launched the Bozhi 7, targeting the mid-end new energy market.

From CATL's power batteries to Huawei's intelligent driving solutions, and Momenta's algorithm models... China has built the world's most complete and competitive intelligent electric vehicle supply chain system.

Embracing China's mature new energy supply chain in depth may be the way out for the electrification transformation of Japanese automakers in China.

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