On the Dash:
- Dealers may face inventory fluctuations as Honda navigates risks to semiconductor and rare-earth supply.
- Component redesigns and multi-sourcing strategies could affect repair, service, and parts availability.
- Dealers should prepare for potential production delays or changes to model allocation in EV and conventional vehicle lines.
Honda disclosed 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 and global tariffs. The company also cited heightened supply chain risks caused by global procurement expansion and intensifying competition from emerging automakers, according to EVP Noriya Kaihara.
Honda’s supply troubles included a semiconductor shortage in the third fiscal quarter, which is now easing. However, the company is beginning to see risks in the rare-earth supply chain due to China’s export restrictions. Kaihara noted that while China’s rare-earth exports are still flowing, permitting remains slow and unpredictable, making it difficult for Honda to ensure on-time deliveries.
To mitigate these risks, Honda is filing export applications promptly, holding additional inventory of components that are difficult to redesign, and maintaining close oversight of suppliers to assess their exposure to rare earths. In the long term, the company plans to redesign components to eliminate the use of rare-earth metals wherever possible, including motors and meters, though Kaihara said this process will take years.
Honda is also overhauling its supplier management strategies to improve its handling of potential supply shortages. EVP Fujimura alluded to the company’s implementation of greater multi-sourcing, inventory management, and upstream risk assessments for materials. For components that must be single-sourced for technical or cost reasons, Honda will perform tighter monitoring and maintain buffer inventories to ensure business continuity.
The combination of tariffs, semiconductor supply constraints, and rare-earth supply issues has created a difficult operating environment for Honda. The company is taking steps to strengthen its supply chain and reduce risk while planning for longer-term redesigns and strategic shifts to maintain competitiveness in the global automotive market.
