Honda executive warns of over 20 billion yen financial consequences from U.S. tariffs

Honda, the Japanese automaker, has announced changes to its production strategy in the United States, aiming to reduce costs and improve profitability, including for hybrid vehicles. These changes come as the company considers various options to mitigate the impacts of potential tariffs.

According to Honda's Global EVP, Shinji Aoyama, approximately 60% of the parts used in vehicle production in the U.S. by Honda use local content, making Honda vehicles the second after Ford with the highest amount of local parts content. However, Honda's mid-term outlook includes changing these allocations in "different ways," but the moves are still contingent on further action by the Trump administration.

One of the short-term options being weighed by Honda is reorganizing its product mix and relocating production that's currently outside of the U.S. The company is also investing over $1 billion in three Ohio plants for the production of internal combustion engine vehicles, fully electric models, and batteries for the North America market.

Honda builds approximately 200,000 vehicles in Mexico annually, 80% of which are sold in the U.S. The company is considering shifting some vehicle production from Mexico and Canada to the U.S. to minimize the impact of potential tariffs.

Mexico is the largest export market for U.S. automotive parts and the fourth-largest producer of automotive parts worldwide, according to the International Trade Administration. Honda relies heavily on overseas components shipped by air or imported from Canada and Mexico for one-third or more of its businesses.

The impact of higher duties on steel and aluminum may be minimal for Honda, as the automaker can turn to its broad supplier network. However, the remaining 40% of Honda vehicles imported from Japan are supported by production in Mexico and Canada and could be more vulnerable to tariffs. But Mexico and Canada are also dependent on the U.S., highlighting the interconnection between North America's automotive supply chains.

Similar moves are being considered by General Motors and Nissan Motor Corp. General Motors CFO Paul Jacobson expressed concerns about permanent auto industry tariffs and may need to consider assembly plant locations to minimize tariff impacts. Ford Motor Co. CEO Jim Farley stated that tariffs on vehicle components from Canada or Mexico would be detrimental to the U.S. auto industry.

Honda's long-term electrification strategy includes the production of electric vehicles at its new EV hub in Ohio. The company, along with its joint venture partners, also announced plans to invest up to CAD $15 billion ($11 billion) to build out an electric vehicle supply chain in Canada.

The Honda board member who discussed the potential impacts of tariffs on the company's development in North America during a conference with analysts is Jiro Morisawa.

Honda Motor Co. announced that a 25% tariff on imports, set to take effect next month, could cause an impact of over 20 billion yen ($132.7 million) on the company. The automaker is taking proactive steps to mitigate these impacts and maintain its competitive position in the U.S. market.

Honda executive warns of over 20 billion yen financial consequences from U.S. tariffs