Honda Forecasts 59% Earnings Plunge as Tariffs and Strong Yen Bite

Japan’s Honda Motor (NYSE:HMC) warned on Tuesday that its operating profit for the fiscal year ending March 31, 2026, will plunge 59% to ¥500 billion (~$3.38 billion) from ¥1.21 trillion a year earlier, blaming U.S. tariffs and a surging yen despite strong demand for its hybrid vehicles.

What’s Driving the Profit Decline?

U.S. Tariff Headwinds: Levies on Japanese auto imports have raised costs at Honda’s North American plants, squeezing margins.

Yen Strength: The yen’s climb to around ¥147.89/$1 increases the reported value of overseas expenses and erodes repatriated earnings.

Hybrid Demand vs. Policy Costs: While sales of hybrids like the Accord and CR-V remain robust, tariff costs and currency effects overshadow volume gains.

Historical Margin Trends

To gauge how Honda’s operating margin has evolved under currency and policy pressures, investors can review trailing-twelve-month profitability ratios—such as EBIT margin—via the Ratios TTM Statement Analysis API, which provides up-to-date trend data against peers.

Forecast Details

FY 2025 Operating Income: ¥1.21 trillion

FY 2026 Guidance: ¥500 billion (–59%)

Exchange Rate Assumption: ¥147.89/$1

Honda’s estimates assume no further drastic moves in tariffs or currency. Any additional yen strength or widening tariff scope could prompt further downward revisions.

What to Watch Next

Quarterly Updates: Honda’s Q2 results (due late October) will shed light on the actual tariff impact and currency hedging effectiveness.

FX Hedging Programs: Look for management commentary on whether Honda will adjust its hedging to cushion yen swings.

Tariff Developments: Future U.S. trade-policy shifts could either alleviate or exacerbate costs—monitor U.S.–Japan automotive discussions for clues.

By tracking Honda’s margin metrics via the Ratios TTM API and staying alert to trade-policy updates, investors can assess whether this earnings setback is a one-time shock or the start of a deeper profitability squeeze.