Honda just lost money for the first time in 70 years

Honda posted its first annual loss since 1955, taking a 1.6 trillion yen (~$10 billion) EV-related writedown that erased what would have been a $7.4 billion profit and left it with a 403.3 billion yen ($2.6 billion) net loss. The article says Honda expects another writedown this fiscal year, while GM, Ford, and Stellantis have also booked large EV pullback charges, underscoring the cost of downshifting EV plans after US emissions-rule rollbacks and the end of the $7,500 tax credit. The broader auto sector faces weaker EV demand, especially in the US, even as regulatory pressure remains in Europe and parts of Asia.

Analysis

The market is now pricing EV capex as stranded asset risk rather than strategic option value, and that re-rating is likely to continue to hit the weakest balance sheets first. Ford and Stellantis are the cleanest losers because their North American profit mix is still most dependent on large ICE trucks/SUVs while they also carry the heaviest legacy EV write-down burden; that combination compresses near-term earnings power and raises the probability of further guidance cuts if demand softness persists into the next 2-3 quarters. GM is better positioned relative to peers because it has more flexibility to slow capex without visibly impairing liquidity, but it is not immune to another round of impairment charges if board-level EV assumptions are reset again.

Second-order, this should be bullish for conventional powertrain suppliers, high-margin pickup/SUV components, and service/parts streams, while pressuring battery, charging, and upstream EV materials names tied to US demand assumptions. The bigger structural read-through is that Chinese OEMs gain share leverage abroad even without a US beachhead: if US incumbents de-prioritize EV execution, they effectively concede the innovation curve in Europe and parts of Asia, where regulation remains tighter and product cadence matters more than political shelter. That creates a longer-duration competitive gap that is harder to reverse than a single-year earnings charge.

The catalyst path is asymmetric: downside can re-open quickly on any further write-downs, weaker dealer incentives, or another policy signal that prolongs gasoline vehicle economics; upside requires either a durable rebound in EV demand or a clear regulatory floor from states and foreign markets, neither of which is imminent. The main contrarian point is that the selloff may be over-aggregating different problems: some of this is accounting pain for sunk capex, not necessarily a fatal deterioration in operating cash flow. That suggests the market may be overpenalizing GM relative to F and STLA, especially if investors start distinguishing between impairment noise and actual margin erosion.

Key Decisions for Investors

• Short F vs long GM over the next 1-3 months: Ford has the weakest risk/reward because incremental EV retrenchment still looks like an earnings drain, while GM has better flexibility to absorb another charge without a balance-sheet stress event.
• Short STLA on rallies for 2-4 months: the market is likely underestimating the probability of another negative reset as it has the largest prior EV write-down and the least room for a clean narrative recovery.
• Pair trade long selected ICE-heavy suppliers / short EV-capex beneficiaries over 3-6 months: favor names exposed to pickup/SUV content, service parts, and transmission/drivetrain demand versus battery/charging-adjacent suppliers with US growth assumptions.
• Buy downside protection on F and STLA into any relief rally: 6-9 month puts or put spreads offer favorable convexity because the next catalyst is more likely to be another guidance cut or impairment announcement than a demand recovery.
• Avoid buying the dip in US EV infrastructure and battery-exposed equities until there is evidence of demand stabilization for at least one full quarter; the risk/reward remains negative because policy support is still eroding faster than consumer adoption is improving.