Honda’s automotive strategy is unraveling worldwide as CEO Toshihiro Mibe tears up his old plan and draws up a new one in the face of the company’s first-ever full-year loss.

Honda Motor Co.’s recent retreats on several fronts will be in the spotlight May 14, when Mibe announces a new roadmap focused on hybrid vehicles rather than full electrics, while delivering financial results for the full fiscal year ended March 31 that are written in red for the first time in the company’s history.

Honda killed off most of its next-generation electric vehicles, including those planned for the Afeela brand under its joint venture with Sony. It then extended the U.S. life cycles of internal combustion engine mainstays, such as the Accord and HR-V, to save money and prop up profits.

The carmaker also said it will withdraw from the South Korean market, shutter an assembly plant in China, and indefinitely freeze plans for a large EV-plant in Canada. Honda is also expected to delay its timeline for autonomous vehicle driving.

First full-year operating loss

Honda warned in March that it would book an operating loss between ¥270 billion and ¥570 billion (€1.46 billion to €3.1 billion) for the fiscal year ending March 31. Honda also forecasts a net loss of between ¥420 billion and ¥690 billion (€2.27 billion and €3.73 billion) in the fiscal year.

The full-year operating loss will be Honda’s first since the company went public in 1957. Japan’s Nikkei newspaper reported on May 8 that the red ink would come in at ¥400 billion (€2.16 billion)

Honda already announced a decline in global sales. Deliveries fell 7.4% to 3.4 million vehicles in the last fiscal year ending March 31st, contracting for a second year to their lowest level since 2012.

Wrong bet

After taking the helm of Honda in 2021, Toshihiro Mibe embarked on a radical makeover. He pledged to turn one of the world’s top makers of internal combustion engines into a fully combustion-free company by 2040.

Honda was the first, and only, Japanese carmaker to set such a timeline for phasing out internal combustion products. It contrasted with the rest of the Japanese industry, which was much more inclined toward a multipath approach using different powertrains.

In 2025, Mibe was forced to rethink his strategy amid sudden changes in U.S. regulations and incentive programs, as well as new U.S. tariffs and slower global growth in EV demand.

EV canceling everywhere

In March, Mibe canceled three electric vehicles planned for U.S. production, including two from its next-generation 0 Series lineup. He said Honda will book up to ¥2.5 trillion (€13.5 billion) in EV-related write-downs and impairments. EV-related costs of around ¥1.1 trillion (€6 billion) were booked in the just-ended fiscal year. The remaining expenses are carried over into the current year. Executives called for a ‘fundamental review’ of Honda’s automobile strategy in February.

Honda canceled three EVs planned for U.S. output: the 0 Series SUV, 0 Series Saloon, and the Acura RSX. Honda had retooled its U.S. production base to build the 0 Series vehicles and Acura RSX, for delivery as early as 2026. Also axed were the Afeela 1 sedan (in cooperation with Sony), slated for delivery late in 2026, and a crossover Afeela model, both based on Honda’s 0 Series EV architecture.

Now, Honda has reportedly decided to suspend its multi-billion-dollar EV investment project in Canada indefinitely after already postponing the plans for around two years in 2025. The company has also begun talks with the Canadian government over the decision.

Honda is considering withdrawing entirely from its planned projects in Canada, depending on how North American electric vehicle policies evolve, according to a Nikkei Asia report. The company already decided in May 2025 to delay the construction of a new battery-electric vehicle plant and an associated battery factory in Ontario by two years. The original plan to begin operations in 2028 has since been pushed back to at least 2030.

However, the latest reports from Japan suggest that even this revised timeline may no longer be viable. The project’s future is now uncertain and heavily dependent on market developments in North America. “Seeing market conditions as unlikely to improve in the short term, Honda decided to indefinitely suspend the project and has entered talks with the Canadian government,” Nikkei Asia reports.

Renewed focus on hybrids

Part of Honda’s course correction will be pushing hybrid vehicles, including a next-generation electrified system slated to debut from around 2027. The new hybrids will eventually feature Honda’s next-generation automated driving technologies, though Nikkei reported that Honda had pushed back the release of the artificial intelligence-powered driving system until 2028.

Honda said last year it aims to more than double global hybrid sales to 2.2 million in 2030. The company sold 928,828 self-charging and plug-in hybrids worldwide in the fiscal year ended March 31. Some 791,000 of them (85%) were sold in North America.

Overall, hybrids accounted for about 23% of Honda’s global sales. By comparison, for Toyota Motor Corp., it’s 43% of its worldwide total.

Honda plans three new hybrid drivetrains for small, midsize, and large vehicles. The small platform is geared toward the Japanese market. The midsize drivetrain, which targets the U.S., will be based on a new 2.0-liter direct fuel injection engine, with a new transmission, compact high-output battery and improved cooling system.

The system will be 25% more compact than the outgoing one. Honda will deploy it in a next-generation midsize platform with improved rigidity, collision protection, and noise reduction. The platform will shed 90 kilograms and cost 10% less.

Meanwhile, engineers are working on a new V-6 engine for large hybrids with 30% better fuel efficiency and 15% stronger acceleration. It will be a dual-motor, all-wheel-drive setup for vehicles such as the Odyssey minivan or Pilot and Passport crossovers. Honda plans to launch 13 models in the U.S. using its next-generation hybrids.