Chip Supply Issues and Asian Market Slowdown Weigh on Honda’s Earnings

Honda Motor Co. revised its annual earnings forecast downward on Friday, citing ongoing semiconductor shortages from Dutch supplier Nexperia and weaker demand in Asian markets. The announcement followed a sharp decline in the automaker’s first-half profits, largely due to the impact of U.S. tariffs. Despite these challenges, Honda indicated that the overall effect of tariffs for the fiscal year would be less severe than previously anticipated.

For the six months ending in September, Honda’s net profit fell 37% year-on-year to 311.83 billion yen ($2.04 billion), falling short of analysts’ projections of 342.97 billion yen, according to Quick data. Operating profit for the July–September quarter also disappointed, totaling 194 billion yen ($1.29 billion) compared with a market forecast of 212.1 billion yen from an LSEG poll and down from 257.9 billion yen in the same quarter last year.

Japan’s second-largest automaker also reduced its operating profit outlook for the fiscal year ending March 2026 by 21%, cutting it to 550 billion yen ($3.65 billion) from the previous estimate of 700 billion yen. Vehicle sales expectations were similarly lowered to 3.34 million units from 3.62 million, with the company citing both supply disruptions stemming from geopolitical tensions between the Netherlands and China over Nexperia and weaker consumer demand across Asia.

Honda now anticipates full-year revenue to decline 4.6% to 20.7 trillion yen and net profit to fall 64% to 300 billion yen. These figures compare to earlier projections of 21.1 trillion yen in revenue and 420 billion yen in profit. On a more favorable note, the automaker expects the negative effect of U.S. tariffs to amount to 385 billion yen for the year, an improvement from its earlier estimate of 450 billion yen. Global car manufacturers continue to face strain from U.S. trade policies, which have disrupted supply chains and increased production costs.

Honda’s shares ended 1.8% lower in Asian trading. Broader Japanese markets also declined, with the Nikkei 225 closing down 1.21% as losses in the Paper & Pulp, Transport, and Communication sectors weighed on performance. Recruit Holdings Co. Ltd. led the index with a gain of 16.09%, followed by Kikkoman Corp., which rose 11.17%, and Mazda Motor Corp., up 8.17%. In contrast, Kanadevia Corp. recorded the steepest decline, dropping 19.18%, while Ajinomoto Co., Inc. and Taiyo Yuden Co., Ltd. both fell over 16%. On the Tokyo Stock Exchange, declining stocks outnumbered advancers by 1,874 to 1,689, with 254 remaining unchanged.