Fitch Ratings has changed Honda Motor's (TYO:7267) outlook to negative from stable, while affirming its A long-term foreign and local currency issuer default ratings, according to a Monday release.

The revised outlook considers a constrained market environment in the US and rising cost headwinds due to tariffs on automotives, Fitch said.

The company's industrial EBIT margin could decline to under 5% until the financial year ending March 2028, Fitch said.

While the company could see a medium-term resurgence due to tariff mitigation efforts and the introduction of a new model, it has limited space for execution risk and further macroeconomic pressure, the rating agency said.

However, the affirmation stems from the company's solid business profile, given its sturdy motorcycle segment with high operating margins and low leverage as well as a sturdy net cash position.

Developments in the company's industrial operating margin, free cash flow margin, or net cash position could trigger future rating actions, Fitch said.