Honda Plunges to a ¥423.9 Billion Loss: Why Its Four-Wheel Business Is Unprofitable Despite Booming Two-Wheel Operations

As Japanese automakers report their results in succession, Honda posted a ¥423.9 billion loss, its first since listing. Abandoning its all-in BEV strategy accounted for most of the loss, while losses in the four-wheel business and the impact of tariffs in particular weighed on profitability. In practical terms, the high profitability of the two-wheel business supports the company, but the results highlight the fact that its overall earnings structure remains dependent on four-wheel operations.

The four-wheel business's profitability remained at just 2.6% even excluding ¥1.4536 trillion in BEV-related losses and ¥331.6 billion in tariffs. Unit sales have also fallen sharply, from a peak of 5.32 million to approximately 3.38 million today. The four-wheel business had an operating margin of 1.9% in fiscal 2018, and the company's persistently unprofitable structure overall has been cited as a backdrop to the loss.

The company has indicated that it plans to rebuild the four-wheel business while capitalizing on the two-wheel business's high profitability. President Mibe Toshihiro (三部 敏宏) suggested that the company could achieve ¥500 billion in operating profit next fiscal year even after deducting BEV-related losses, while the prevailing view is that improving the core four-wheel business will be key to restoring profitability over the long term.

For the current fiscal year's outlook, the company is exploring a restructuring of its operations, including deeper cooperation with Nissan even after the termination of their alliance. Returning the four-wheel division to a customer-centric approach has been identified as an urgent task. The company's management base is expected to retain a degree of stability, supported by the highly profitable two-wheel division, but the four-wheel business's lack of growth will be a focus going forward.