Honda Motor Co., Ltd. (HMC) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reflects a mixed outlook. Positive aspects include strong motorcycle business performance and a slight dividend increase. However, challenges such as operating losses in the automobile segment, significant EV-related losses, and declining sales in key markets like Asia and China temper the positive sentiment. The market's uncertainty regarding tariffs and unclear management responses further contribute to a neutral sentiment. Given these factors, the stock price is likely to remain stable within the next two weeks, resulting in a neutral prediction.
Key Financial Performance
Operating Profit (Q1 FY2026) JPY 244.1 billion, lower by JPY 240.5 billion year-over-year. Reasons: Negative impacts from tariffs (JPY 124.6 billion), EV-related nonrecurring expenses (JPY 113.4 billion), currency effects (JPY 86.1 billion), and increased expenses (JPY 69.4 billion). Positive impacts from sales (JPY 109.1 billion) and pricing revisions (JPY 68.5 billion).
Equity Method Earnings (Q1 FY2026) JPY 4.2 billion, higher by JPY 2.7 billion year-over-year. Reasons: Not explicitly mentioned.
Quarter Profit Attributable to Parent (Q1 FY2026) JPY 196.6 billion, lower by JPY 197.9 billion year-over-year. Reasons: Not explicitly mentioned but likely linked to the same factors affecting operating profit.
Motorcycle Operations Operating Profit (Q1 FY2026) JPY 189 billion, up by JPY 11.3 billion year-over-year. Reasons: Positive sales impact (JPY 41 billion) due to increased sales in South America, pricing revisions (JPY 14.2 billion), and R&D (JPY 1.3 billion). Negative impacts from expenses (JPY 12.7 billion), currency effects (JPY 30.6 billion), and tariffs (JPY 1.8 billion).
Automobile Operations Operating Loss (Q1 FY2026) JPY 29.6 billion loss. Reasons: Positive sales impact (JPY 46.4 billion) due to increased sales in North America and pricing revisions (JPY 53.5 billion). Negative impacts from expenses (JPY 43.1 billion), R&D (JPY 26.4 billion), and currency effects (JPY 47.3 billion).
Free Cash Flow (Q1 FY2026) JPY 294 billion. Reasons: Not explicitly mentioned.
Net Cash Balance (End of Q1 FY2026) JPY 2,907.9 billion. Reasons: Not explicitly mentioned.
Operating Cash Flow After R&D Adjustment (Q1 FY2026) JPY 583 billion. Reasons: Not explicitly mentioned.
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Operating Highlights
EV-related nonrecurring expenses: Provision for losses on EVs currently sold in the U.S. and the impact from write-off of development asset of EV models due to the change in product range.
Motorcycle sales expansion: Sales growth in Brazil and Vietnam, achieving record high operating profit for a quarter period.
Automobile sales in North America: Strong sales performance in North America despite tariff impacts.
Operating profit forecast revision: Revised up to JPY 700 billion for FY ending March 2026, reflecting a JPY 200 billion increase due to tariff impact review and exchange rate changes.
Cost management: Pricing revisions contributed positively to profits, while R&D and tariff impacts negatively affected operating profit.
Share buyback program: Acquisition of shares worth JPY 936.5 billion as part of a JPY 1.1 trillion buyback program resolved in December 2024.
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Risk or Challenges
Tariffs: Tariffs have led to a significant profit decline of JPY 124.6 billion in the first quarter and are expected to have a gross negative impact of JPY 450 billion for the fiscal year ending March 2026. This remains a major uncertainty for the company.
EV-related nonrecurring expenses: Nonrecurring expenses related to EVs, including losses on EVs sold in the U.S. and write-offs of development assets due to product range changes, negatively impacted profits by JPY 113.4 billion in the first quarter.
Currency exchange rates: Currency fluctuations, particularly the exchange rate against the U.S. dollar, resulted in a negative impact of JPY 86.1 billion in the first quarter and are expected to negatively impact the fiscal year by JPY 302 billion.
Automobile business performance: The automobile segment reported operating losses of JPY 29.6 billion in the first quarter, driven by declines in sales in China and other Asian regions, as well as increased R&D and other expenses.
R&D expenses: Increased R&D expenses led to a profit decline of JPY 24.5 billion in the first quarter and are expected to negatively impact the fiscal year by JPY 126 billion.
Expenses: General expenses negatively impacted profits by JPY 69.4 billion in the first quarter and are expected to have a negative impact of JPY 91.5 billion for the fiscal year.
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Guidance & Outlook
Full Year Operating Profit Forecast: Revised up to JPY 700 billion for the fiscal year ending March 2026, reflecting a JPY 200 billion increase from the previous forecast due to changes in exchange rate assumptions and tariff impact review.
Net Profit Forecast: Projected at JPY 420 billion for the fiscal year ending March 2026, up by JPY 170 billion from the previous forecast.
Exchange Rate Assumption: Revised to JPY 140 against the U.S. dollar for the fiscal year ending March 2026.
Dividend Forecast: Full-year dividend forecast remains unchanged at JPY 70 per share for the fiscal year ending March 2026.
Motorcycle Unit Sales Forecast: Expected to remain at 21.3 million units for the fiscal year ending March 2026, with growth in Brazil offsetting declines in Europe.
Automobile Unit Sales Forecast: Maintained at 3.62 million units for the fiscal year ending March 2026.
Power Products Unit Sales Forecast: Maintained at 3.67 million units for the fiscal year ending March 2026.
Capital Expenditures, Depreciation, and R&D: Expected spending for fiscal year ending March 2026 outlined but specific figures not detailed in the transcript.
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Shareholder Return Plan
Forecast for full year dividend: JPY 70 per share, unchanged from the previous published forecast.
Share buyback program: Resolved on December 23, 2024, for JPY 1.1 trillion. As of July 31, 2025, shares worth JPY 936.5 billion have been acquired.
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Key Q&A
Q:What is the impact of the U.S.-Japan tariff agreement on Honda's business?
A:The reduction of automobile tariffs from 25% to 15% between the U.S. and Japan is a positive development for Honda, benefiting both the company and its customers. However, there are still uncertainties regarding the retroactive application of tariffs and their effective dates. Honda emphasizes the importance of free trade and competition globally and is preparing for this new normal by increasing local production in the U.S. and discussing localization of key hybrid vehicle components with suppliers.
Q:What are Honda's assumptions for tariffs in their fiscal forecast?
A:Honda's fiscal forecast includes assumptions for tariffs on CBUs, parts, raw materials, and motorcycles. The gross impact of tariffs was reduced from JPY 650 billion to JPY 450 billion after detailed calculations. Honda is reallocating production to minimize tariff impacts, such as producing in Indiana instead of importing from other countries. They assume a 15% tariff rate starting in September for calculations.
Q:What is the status of Honda's operating losses in the automobile segment?
A:Honda experienced operating losses in the automobile segment from April to June, the first time since the 2020 fiscal year during the pandemic. The losses are attributed to tariff impacts and declining unit sales in Asia, Europe, and Japan due to increased competition and market-specific challenges.
Q:What is Honda's strategy for addressing declining sales in Asia, Europe, and Japan?
A:Honda is facing challenges in Asia due to competition from Chinese OEMs and varying government subsidies for hybrid vehicles. In Europe, Honda has reduced production capacity and is focusing on key markets like the U.S., Japan, and India. The company plans to reinforce hybrid model launches in Asia and revisit its strategy for the European market.
Q:What are the reasons behind Honda's strong motorcycle business performance?
A:Honda's motorcycle business achieved a 19.9% operating profit margin in the first quarter, driven by strong performance in South America and Vietnam. In South America, demand exceeds supply, and Honda is increasing production capacity. Pricing remains healthy, contributing to high profitability. However, Honda acknowledges the high volatility in this region.
Q:What is Honda's approach to EV-related losses and production plans?
A:Honda incurred JPY 250 billion in EV-related losses in the first quarter, including JPY 50 billion for write-offs of certain models. The total EV-related losses for the fiscal year are expected to be JPY 650 billion, with JPY 250 billion being nonrecurring. Honda is narrowing down its EV volume and plans to launch the 0 Series EV in the U.S. next term, despite market challenges and the impact of IRA subsidies.
Q:What is Honda's response to the U.S.-Mexico-Canada Agreement (USMCA) tariffs?
A:Honda is scrutinizing the impact of USMCA tariffs on CBUs and parts imported from Mexico and Canada. Many parts are exempted from tariffs under USMCA rules, and Honda is working with suppliers to identify and minimize tariff impacts. For hybrid systems, key components like batteries and motors are currently imported from Japan, and Honda is discussing localizing their production in the U.S.
Q:What is Honda's pricing strategy in response to tariffs and market conditions?
A:Honda has implemented annual price hikes in the U.S. in line with inflation and market conditions. However, the company is cautious about further price increases directly related to tariffs, as other OEMs have not raised prices significantly. Honda is monitoring the market and inflation trends before making additional pricing decisions.
Q:What is Honda's plan for addressing challenges in the Chinese market?
A:Honda is facing difficulties in China, with sales declining for 17 consecutive months. The company has adjusted its production capacity and is working to improve the competitiveness of its e:N Series EVs by addressing pricing and intelligent functionality issues. Honda is also exploring partnerships and collaborations to enhance its market position in China.
Q:What is the status of Honda's discussions with Nissan regarding collaboration?
A:Honda is exploring various formats of collaboration with Nissan and Mitsubishi Motors but has not finalized or announced any specific agreements. The company will provide updates once decisions are made.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the actual tariff rates for certain parts and components under the USMCA, citing strategic sensitivity. They also refrained from disclosing the exact percentage of price hikes planned for vehicles in the U.S., stating that it would affect sales. Additionally, no clear timeline or detailed strategy was provided for addressing the challenges in the Chinese market or the specifics of the collaboration discussions with Nissan.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Accounting Finance
Admin Director
America result
Brazil Vietnam
CFO Chief
Chief Officer
Corporate Admin
Daisuke Narahashi
Director General
Div Daisuke
ET schedule
Finance Unit
General Manager
Greimel Unidentified
Hans Greimel
Inajima Unidentified
Koki Unidentified
Leussink Unidentified
Limited result
Ltd Managing
Manager Accounting
Motor Limited
Motorcycle sale
Mr Director
Mr support
Narahashi Unidentified
Nishizono Koki
Officer CFO
exchange rate
tariff
HMC Transcript
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The earnings call highlights positive aspects like production efficiency and hybrid system cost reduction, but is offset by uncertainties in EV targets and significant EV-related losses. The Q&A reveals management's lack of clarity on CO2 targets and financial impacts, contributing to a neutral sentiment. Without a market cap, it's assumed the reaction will be mild.
Honda Motor Co., Ltd. (HMC) Q4 2026 Earnings Call Prepared Remarks Transcript
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The earnings call highlighted significant EV-related losses, semiconductor shortages, tariff burdens, and rising material costs, all negatively impacting profitability. Despite maintaining dividends and strong cash reserves, the negative financial performance, particularly in the automobile sector, outweighs the positives. The Q&A section did not provide further clarity or positive insights, reinforcing concerns about the company's future performance. These factors, combined with weak guidance and ongoing challenges, suggest a likely negative market reaction in the short term.
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Honda Motor Co., Ltd. (HMC) Q1 2026 Earnings Call Transcript
Unknown8-8
The earnings call reflects a mixed outlook. Positive aspects include strong motorcycle business performance and a slight dividend increase. However, challenges such as operating losses in the automobile segment, significant EV-related losses, and declining sales in key markets like Asia and China temper the positive sentiment. The market's uncertainty regarding tariffs and unclear management responses further contribute to a neutral sentiment. Given these factors, the stock price is likely to remain stable within the next two weeks, resulting in a neutral prediction.
HMC Report
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