Market Concern Grows Over Honda’s EV Transition
Global investment bank Morgan Stanley has warned that there may be further pressure on the stock of Japanese automaker Honda Motor Co. after the company revealed significantly larger-than-expected losses related to its electric vehicle (EV) strategy. According to analysts, Morgan Stanley sees more downside for Honda’s shares in the short term due to financial setbacks tied to the company’s evolving EV roadmap.
The brokerage firm believes Honda’s stock may underperform the broader market index over the next 15 days, assigning a 70%–80% probability to this scenario. This cautious outlook has raised concerns among investors about the near-term performance of the automaker’s shares.
Rating Downgrade and Reduced Price Target
Reflecting the uncertain outlook, Morgan Stanley downgraded Honda’s rating from “Overweight” to “Equalweight” on March 11, 2026. At the same time, the bank reduced its price target for the company’s shares to ¥1,600, down from the previous ¥2,000.
Analysts noted that the downgrade was driven by the company’s weaker earnings outlook and its revised financial guidance. These developments reinforce the view that Morgan Stanley sees more downside in Honda’s stock performance compared with the broader Japanese equity market.
Massive EV-Related Losses
One of the biggest factors behind the negative outlook is Honda’s announcement of significant EV-related losses. The automaker disclosed potential losses of up to ¥2.5 trillion (around $15.7 billion), including approximately ¥1.7 trillion in cash outflows.
These losses are primarily linked to a reassessment of Honda’s electric vehicle strategy in North America. As part of this strategic shift, the company cancelled three planned EV models, leading to large write-downs and financial adjustments.
Because the disclosed losses were larger than expected, analysts believe they could continue to weigh on investor sentiment and the company’s share price in the near term. This is a key reason Morgan Stanley sees more downside in the stock.
First Annual Loss in Decades
The financial impact of the EV transition is also reflected in Honda’s earnings outlook. The company now expects a consolidated net loss of between ¥420 billion and ¥690 billion for fiscal year 2026.
If this projection materializes, it would mark Honda’s first annual loss in nearly 70 years as a publicly listed company. Such a rare financial setback underscores the scale of the challenges facing traditional automakers as they shift toward electric mobility.
Dividend Stability Offers Some Support
Despite the projected losses, Honda is attempting to reassure shareholders by maintaining stable dividend payments. The company plans to keep its fiscal 2026 dividend at ¥70 per share and has indicated a desire to maintain the same payout level for fiscal 2027.
Morgan Stanley noted that this dividend yield could provide some downside protection for investors. However, the bank still believes short-term risks remain significant, reinforcing Morgan Stanley’s view that Honda’s stock faces further downside amid EV losses, rising raw material costs, and broader geopolitical uncertainties affecting the global automotive industry.
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