Honda Motor Co. (HMC.US) has cut its annual profit forecast by approximately one-fifth and reported a 25% decline in operating profit for the second fiscal quarter. The weaker performance was attributed to U.S. import tariffs and one-time costs related to electric vehicles.

Japan’s second-largest automaker revised its operating profit outlook downward by 21% to ¥550 billion ($3.65 billion) for the fiscal year ending March 2026, compared with its previous projection of ¥700 billion. The updated forecast also factors in reduced production due to semiconductor supply shortages.

For the July-September quarter, Honda posted a profit of ¥194 billion ($1.29 billion), missing the average analyst estimate of ¥212.1 billion from a survey of nine analysts by LSEG. The figure also marked a decline from ¥257.9 billion in the same period last year.

The company’s earnings for the six months ending September 30, 2025, also saw a significant drop, pressured by weak global demand and rising costs. Consolidated profit attributable to owners of the parent company fell 37% year-over-year to ¥311.8 billion ($2.03 billion). Diluted earnings per share plunged to ¥76.30 from ¥103.25 a year earlier.

Operating profit dropped 41% to ¥438.1 billion, reflecting higher raw material expenses and sluggish recovery in key export markets. Revenue for the first half of fiscal 2026 declined 1.5% to ¥10.6 trillion, signaling a slight contraction amid macroeconomic headwinds and currency fluctuations.

These results underscore the challenges Japanese automakers face, including global supply chain disruptions, EV transition costs, and exchange rate volatility.