TOKYO: Honda Motor Co. reported a 50% drop in first-quarter operating profit on Wednesday, missing analyst expectations as U.S. auto tariffs and a stronger yen weighed on earnings.
The Japanese automaker posted operating profit of 244.17 billion yen ($1.65 billion) for the quarter ended June 30, falling short of the 323.48 billion yen average estimate compiled by LSEG. Revenue, however, rose to 5.34 trillion yen ($36 billion), beating forecasts of 5.25 trillion yen.
Despite the earnings miss, Honda raised its full-year operating profit forecast by 40% to 700 billion yen, citing expectations of a weaker yen and reduced tariff impact. “Our local production manufacturing ratio is high to begin with… our stance is to produce where there is demand,” a Honda executive said during the earnings call, adding that the company plans to expand U.S. production without heavy capital investment.
Honda is also considering ramping up stateside manufacturing of new energy vehicles to sidestep tariffs.
Shares of Honda rose 1.7% following the earnings release before trimming gains.
The company’s motorcycle division delivered record quarterly operating profit, driven by strong sales in Brazil and Vietnam. Electric vehicle sales remained robust in North America, though global auto sales fell 5% due to declines in China, Asia and Europe.
Auto exports to the U.S. remain vital to Japan’s economy, accounting for 28.3% of all shipments in 2024, according to customs data. However, the sector has been hit hard by a 25% tariff imposed by President Donald Trump in April. A new trade deal announced in July includes a reduced 15% tariff rate, though implementation details remain unclear.
In June, the value of Tokyo’s car exports to the U.S. dropped 25.3% year over year, even as volumes rose 4.6%, Japan’s trade ministry reported.
Other Japanese automakers have also felt the sting of trade headwinds. Nissan posted a net loss of 115.8 billion yen in Q1, while Toyota is expected to report its weakest operating profit in over two years on Thursday.
Honda and Nissan ended merger talks in February but are still exploring potential business collaborations, a Honda executive said.
Japanese Prime Minister Shigeru Ishiba pledged to engage directly with President Trump to expedite tariff relief. Chief trade negotiator Ryosei Akazawa departed for Washington on Tuesday to press for a formal executive order.