【By Guo, Observer Net】Honda, Japan's second-largest automaker, is having a tough time. Reuters reported on November 11 that Honda announced a significant cut in its annual profit forecast, which highlights the direct pressure from U.S. tariffs and global chip shortages, but deeper and longer-term challenges come from the increasingly fierce competition from Chinese automakers.

For the current fiscal year (ending March 2026), Honda has reduced its operating profit forecast by 21% from 70 billion yen (about 32.2 billion yuan) to 55 billion yen (about 25.3 billion yuan), and lowered its annual car sales forecast from 3.62 million units to 3.34 million units. The reasons include one-time costs related to electric vehicles, as well as shortages of semiconductor components, with 11,000 units of the expected sales reduction directly related to shortages at NXP Semiconductors.

Honda also estimates that U.S. tariffs will cost it 38.5 billion yen (about 17.7 billion yuan), although this number is lower than the initially warned 45 billion yen (about 20.7 billion yuan).

On October 10, Honda's stock fell sharply by 4.7%. However, for Honda and other Japanese automakers, a more pressing concern is the continuous decline in market share in Southeast Asia, which was once a region where Japanese automakers had almost no challenges.

Until recently, Japanese automakers believed they could maintain stability in Asian markets outside China without repeating the decline seen in the Chinese market. But this assumption no longer holds true.

"In markets like Thailand, the competitive landscape is extremely intense, and overall, we have lost our price competitiveness," said Honda Executive Vice President Noriyoshi Kikuta at a briefing on the 7th: "The challenges are not limited to declining sales. To attract consumers, automakers are increasing discounts and lowering prices, which means the profit margin for new car sales will be further compressed."

Currently, Honda expects to sell 925,000 cars in Asia (including China) during this fiscal year, a reduction of more than 10% compared to the previous target of 1.09 million units.

Originally, it was predicted that sales in Asian markets excluding China would decrease by 5,000 units compared to last year, but now this number has expanded to a decrease of 75,000 units.

On October 29, the Honda Super One prototype car made an appearance at the Tokyo International Exhibition Center during the 2025 Japan Mobility Show. IC Photo

An industry insider said that in the entire Southeast Asian region, including Thailand and Indonesia, Japanese automakers are facing increasingly severe competition from Chinese electric vehicle manufacturers such as BYD.

"Southeast Asia is being severely impacted by Chinese automakers," the insider said before Honda released its earnings. "The growth of Chinese electric vehicles in Thailand over the past two years has been astonishing."

According to company data, Honda's retail sales in Indonesia fell nearly 30% year-on-year in the first nine months of this year, while in Malaysia it dropped 18%, and in Thailand it decreased by 12%.

The report stated that Honda has no plans to introduce new models in the region for this fiscal year or the next, and this delay may further open up market space for Chinese manufacturers.

Analysts noted that Japanese automakers are currently turning their attention to India, a market almost closed to Chinese electric vehicle manufacturers. Honda said last month that it would establish India as the production and export base for one of its planned electric vehicles. Toyota and Suzuki have separately announced investments totaling $11 billion to strengthen their manufacturing and export capabilities in India.

However, experts say that Honda faces deeper structural challenges.

According to Honda's financial report, the automotive division has recorded an operating loss for the third consecutive quarter, performing worse than the motorcycle division. Tetsuo Tsukada, founder of Tsukada Mobility Research Institute, said that under the current structure, Honda's automotive business still faces a severe situation, with the profitability gap between the two business segments "unbalanced." "If Honda separates its four-wheeled and two-wheeled vehicle businesses, the motorcycle business could thrive globally."

The United States remains Honda's largest market, accounting for 42% of its global sales, with a 4% year-on-year increase. But besides the U.S. tariff issue, Honda also faces resistance in North America.

Chip shortages forced it to close a factory in Mexico and adjust production in the United States and Canada, leading to a reduction of 15 billion yen (about 6.9 billion yuan) in the company's operating profit forecast.

Honda's stock has declined by 1.4% this year, underperforming the Nikkei 225 index, which has risen nearly 28%.

Previously, Honda and Nissan had discussed merger talks, but the negotiations broke down in February this year.

Tsukada said that given the current weak positions of Honda, Nissan, and Mitsubishi, it is unlikely that merger discussions will be restarted. "If Honda merges with Nissan or Mitsubishi now, it would only be a league of the weak," he said.

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