Honda has canceled three electric vehicles (EVs) it was developing for the U.S. market, citing President Donald Trump’s tariffs and rising competition from Chinese EV companies.
Key Takeaways
Honda has canceled three planned electric vehicles (EVs) for the U.S. market due to tariffs and competition from Chinese EV companies. The automaker cited an 'extremely challenging earnings situation' and expects up to $15.7 billion in costs over multiple financial years.
The Japanese automaker announced on Thursday that the Honda SUV and Saloon, first unveiled at the 2025 Consumer Electronics Show, along with the electric Acura RSX, have been scrapped. The company attributed this decision to an 'extremely challenging earnings situation' caused by tariffs affecting its gas and hybrid vehicle business.
Honda also pointed to its 'inability to respond flexibly' to competition from China and slowing growth in the U.S. market as contributing factors. The company warned that these changes could result in costs of up to $15.7 billion over multiple financial years, with cash outflows expected to reach 1.7 trillion yen due to supplier compensation.
In response, Honda plans to reassess its resource allocations and strengthen its hybrid models in the U.S. market. Additionally, CEO Toshihiro Mibe and Executive Vice President Noriya Kaihara will voluntarily forgo 30% of their compensation for three months, with other executives giving up 20%. The company expects to incur ¥2.5 trillion ($15.7 billion) in expenses and losses over multiple financial years due to this strategy shift.
Honda joins a growing list of legacy automakers that have scaled back their EV plans for the U.S., including Ford, Stellantis, General Motors, and Volkswagen. Global carmakers have booked more than $70bn (R1.18-trillion) in writedowns in the past year as they scale back electric vehicle ambitions due to a tough US market under President Donald Trump, price wars in China, and complex vehicle types in Europe.
Shares in Honda Motor fell more than 6% in Tokyo on Friday after the automaker flagged its first annual loss in almost 70 years as a listed company. If sustained, the drop would mark the company's biggest one-day fall since early February 2025. The stock was down 6.7% at ¥1,352 as of 0040 GMT.
According to TechCrunch, Honda also halted development of the electric Acura RDX and the Honda 0 sedan and SUV, three models that were the company’s first ground-up EVs but about which very little was shared with outsiders. The decision could backfire in several ways, notably by causing Honda to fall behind in two significant industry shifts: electric drivetrains and software-defined vehicles.
Honda's move to shelve its EV plans is seen as a strategic misstep that could hinder its ability to compete in the future. The company has yet to make significant progress in areas such as advanced driver assistance systems and slick infotainment software, which are critical for staying competitive in the evolving automotive market.
Honda's identity crisis extends beyond just EVs. As an internal combustion engine company, it faces challenges in adapting to a market that increasingly values reliability and affordability over traditional driving experiences. The company's recent earnings report highlighted its struggles in China, where it failed to deliver value for money compared to newer EV manufacturers.
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