Dive Brief:
- Honda Motor Co. lowered the impact of tariffs for the fiscal year ending March 31 from 450 billion yen ($2.85 billion) to 310 billion yen ($1.9 billion), according to the company's Feb. 10 earnings call.
- Honda partially offset tariffs through logistics adjustments and increased procurement that met the requirements of the U.S.-Mexico-Canada Agreement, executives told investors. Nevertheless, some tariff costs will extend beyond the current fiscal year.
- "So we want to closely monitor the cost, so we might proceed with more expanding of our local procurement and try to control costs more closely," Eiji Fujimura, CFO and managing executive officer, said.
Dive Insight:
Honda disclosed the tariff burden while also reporting a 267 billion yen ($1.7 billion) operating loss for the last nine months of 2025 as it navigated shifts in U.S. electric vehicle policy. Other issues facing the carmaker included "heightened supply chain risk due to expansion of global procurement, further exacerbated by intensifying global competition from emerging OEMs," EVP Noriya Kaihara said.
"Thereby, we need to conduct a fundamental review of our strategies to rebuild our competitive strength," Kaihara said.
Honda's supply troubles included a semiconductor crunch in the third fiscal quarter, which is easing, Kaihara said. However, the next wave of risk is the rare earth supply chain, affected by China's export restrictions.
Honda is beginning to see signs of supply risk related to rare earth metals, and “will closely monitor the situation and take actions as needed," Kaihara said.
China's rare earth exports are still moving, but permitting is slow and unpredictable, making it difficult for Honda to assume on-time deliveries, Kaihara said. Therefore, the company adopted a strategy of promptly filing export applications, holding extra inventory of components that are hard to redesign, and staying close to suppliers to assess their rare earth exposure.
Long term, Honda wants to redesign components wherever possible to remove rare earth elements, including motors and meters, Kaihara said, but the process will take years.
Honda is also overhauling how it works with suppliers to improve its management of possible supply shortages, Fujimura said. The company's strategy includes greater multi-sourcing, inventory management and risk assessments that extend upstream to material supply.
When single-sourcing is necessary, such as for cost or technical reasons, Honda will perform tighter upstream monitoring of suppliers and build buffer inventories for business continuity, Fujimura said.
"So to be blunt, we have been relying heavily on our suppliers," Fujimura said. "So that's something we are reviewing fundamentally."
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