Honda Motor (NYSE:HMC) shares edged up 1% in Tokyo on Tuesday, holding steady despite a stark warning from the company that it expects a 59% drop in profits this year.
Investors appeared to take comfort in the fact that the news, though disappointing, was neither a shock nor worse than feared.
Japan’s second-largest carmaker now expects to generate operating income of $3.38 billion in the year to March 2026, down from $8.2 billion last year.
The downgrade comes as Honda grapples with the twin pressures of punitive US tariffs and a cooling electric vehicle market.
Unlike several rivals, including Ford, General Motors and Stellantis, which have scrapped guidance altogether amid the policy whiplash from Washington, Honda has opted to maintain its outlook, albeit at a sharply lower level.
The company estimates tariffs will shave $4.4 billion off its operating profit this year, with more than two-thirds of that hit related to around 550,000 finished vehicles imported into key markets.
Honda also announced it is postponing a $11 billion plan to build an electric vehicle supply chain in Ontario for about two years.
The project, which was originally unveiled last April, is now on ice due to what the company described as weakening demand for battery-powered cars.
Talks over a potential merger with Nissan collapsed earlier this year, although the two companies still have a loose agreement to collaborate on technology.
Honda’s chief executive, Toshihiro Mibe, said the firm remains open to “strategic partnerships”, but confirmed there had been no movement on a tie-up with Nissan since discussions ended in February.