Honda exec says US tariffs could cause ‘$20 billion plus impact’

Dive Brief:

• Honda Motor Co. said a 25% tariff on imports poised to take effect next month would have a “$20 billion plus impact” on the company, Global EVP Shinji Aoyama said on a call with analysts on Feb. 13. 
• But the automaker is weighing several options to mitigate the impacts ahead of any new tariffs, including shifting some vehicle production from Mexico and Canada to the U.S., executives said on the call. Similar moves are also being considered by General Motors and Nissan Motor Corp.
• However, as the situation is fluid, Aoyama said the automaker must be prepared to react. “In terms of the tariff increase, again, in the big picture, of course, every year, the situation is rather different,” he said.

Dive Insight:

Honda is one of many automakers that rely on Mexico for its automotive supply chain. The country 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 itself builds roughly 200,000 vehicles in Mexico annually, 80% of which are sold in the U.S.

Tariffs could be costly for Honda, Aoyama said. Roughly one-third or more of its businesses use overseas components shipped by air or imported from Canada and Mexico. The remaining two-thirds are produced in the U.S.

Among the short-term options being weighed by Honda is reorganizing its product mix and relocating production that’s currently outside of the U.S. Honda’s mid-term outlook includes changing these allocations in “different ways,” according to Aoyama. But the moves are still contingent on further action by the Trump administration. 

“Of course, we have to watch carefully what’s going on then decide when to start with that,” Honda CFO Eiji Fujimura said on the call.

Outside of possible tariffs on vehicle components and parts, the impact of higher duties on steel and aluminum may be minimal for Honda, as the automaker can turn to its broad supplier network, according to Aoyama.

“We have quite a bit of procurement within the country in the U.S.,” he said. 

Ahead of potential new tariffs, Honda remains focused on the short-term to mid-term ramifications as the company begins to execute its long-term electrification strategy, which includes the production of electric vehicles at its new EV hub in Ohio. 

The automaker is investing over $1 billion in three Ohio plants to produce internal combustion engine vehicles and fully electric models for the North America market. It also includes the domestic production of batteries.

Honda is also looking to reduce U.S. production costs and improve profitability further, including for hybrid vehicles, which may help it better withstand the impact of any tariffs on other products. As a result of cost-cutting initiatives, Honda expects its profit margins on its next-generation vehicles will improve from 2027 onward.

“We are going to…