Honda Motor reported a surprise 39% fall in quarterly operating profit on Tuesday, 10 November 2026, as the cost of restructuring its electric-vehicle business and slumping sales in China weighed on results. Operating profit for the July-to-September quarter dropped to 118 billion yen, about $747 million, well below the 250 billion yen median forecast in a poll of nine analysts by LSEG.

The main drag was the bill for overhauling Honda's EV operations. The carmaker booked 484.8 billion yen, about $3.07 billion, in EV restructuring charges during the quarter, and kept its estimate for such costs this financial year at 520 billion yen. High parts and material costs linked to the war in Iran also squeezed margins, while sales in China continued to fall.

Hybrids drive the brighter outlook

Despite the weak quarter, Honda raised its full-year operating profit forecast by 20%, to 780 billion yen from 650 billion yen, and lifted its net profit guidance to 500 billion yen from 400 billion yen. Revenue expectations for the year to March 2027 were also raised, to 24.4 trillion yen from 24.15 trillion yen.

The upgrade rests on demand for hybrid vehicles, particularly in the United States, where Honda's sales rose 9% in the second quarter. Like Toyota last week, Honda is becoming more dependent on the US market, where buyers are choosing hybrids over fully electric cars and where Japanese makers face no competition from Chinese rivals. Quarterly revenue rose 12.9% to 5.98 trillion yen, and excluding the EV charges, adjusted operating profit more than doubled to 602.8 billion yen from 295.7 billion yen a year earlier.

Shares fall in New York

Investors were not convinced by the brighter forecast. Honda's US-listed shares fell 2.68% to $34.88 in New York trading on Tuesday, 10 November, as the scale of the EV charges overshadowed the raised outlook. Chief financial officer Masao Kawaguchi said talks with suppliers had made good progress and that Honda expects to settle most of the remaining EV costs this financial year.

The results underline the awkward transition facing Japan's carmakers: hybrids are paying the bills today, but unwinding earlier EV plans is expensive. Whether the raised forecast holds will depend on US hybrid demand staying strong and on China sales stabilising. Sources: SRN News (Reuters) and Grafa.