Honda profit rises to an all-time high in US

Honda Motor Co.’s operating profit rose to an all-time high in the first quarter as strong sales in the US overcame a slowdown in China, putting Japan’s second largest automaker in line for another year of record profit.

Honda’s profit in the three-month period through June rose 23% year on year to ¥484.7 billion ($3.3 billion), beating analysts’ estimate of ¥442 billion, thanks to steady demand for cars in the US and strong two-wheeler sales in India and Brazil. The company also cited a weak yen as a contributing factor to its strong results.

The automaker, however, kept its outlook unchanged at ¥1.42 trillion, joining other Japanese automakers who held off revising their outlooks due to recent volatility in the country’s currency.

“Hybrid sales were robust in our main markets of Japan and the US," said Chief Financial Officer Eiji Fujimura at a briefing on Wednesday, adding the company saw its “profits rising in both the two-wheeler and four-wheeler segments."

Honda has been cashing in on a surge in demand for hybrids as fading subsidies weigh on sales of battery electric vehicles globally. The automaker said in May it expects to sell 1 million hybrids this year, and plans to boost production further to be able to invest more in manufacturing EVs.

Honda plans to invest ¥10 trillion building out its electric production capacity by 2030. The company aims for electrified cars to make up 100% of its sales by 2040.

While the demand for hybrids in the US is solid, Honda has been struggling in China due to a lack of competitive EVs to rival local companies such as market leader BYD Co. Honda sales in China fell 40% in June, leading to the decision to shut down one of its joint venture plants in November.

“The business environment remains difficult in China but we will revise production capacity there and bring new attractive EVs from now on," Fujimura added, referring to the company’s plans to reduce its production of gasoline-powered cars there by 19% from October.

Two new Honda EV models will go on sale in China later this year, the first of 10 new EV models the company plans to launch in the country by 2027.

In an effort to further improve its competitiveness in China, Honda agreed last week to collaborate with Nissan Motor Co. on developing software, batteries and other electric vehicle-related technologies.

Confronted with a volatile yen over the past week, Honda opted not to make any changes to its forex forecast of ¥140 level against the dollar as uncertainty remained in the markets despite efforts by the Bank of Japan to calm investors’ nerves on Wednesday.

BOJ Deputy Governor Shinichi Uchida pledged to refrain from hiking interest rates when the markets are unstable. “What scares us the most is the possible impact this volatility may bring to the real economy" including the company’s two-wheeler business, Fujimura said.

Bloomberg Intelligence senior auto analyst Tatsuo Yoshida said Honda would likely keep its outlook unchanged until calm was restored. “We expect Honda to revise its outlook once drastic movements in stocks and forex cease going forward," he said.

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