Honda Motor posts higher profit despite weak car sales in China – 2nd update

By Kosaku Narioka

Honda Motor reported a rise in first-quarter net profit on higher sales of hybrid vehicles and motorcycles, despite weak car sales in China.

The Japanese automaker said on Wednesday that net profit rose 8.7% from a year earlier to 394.66 billion yen, or $2.73 billion, for the three months ended in June. That beat analysts’ estimates of 338.90 billion yen in a survey by data provider Quick.

Honda said rising product prices and a weakening yen weighed on its profits.

First-quarter revenue rose 17% to 5.405 trillion yen.

Passenger car operating profit up 26% to 222.84 billion yen, driven by strong sales of gasoline-electric hybrid vehicles in Japan and the U.S.

The motorcycle division’s operating profit rose 24% to 177.65 billion yen as sales growth in India and Brazil offset a decline in Thailand.

Honda has cut its group car sales forecast for the year ending March 2025, citing weaker sales in China. It cut its sales forecast in China this fiscal year by 220,000 vehicles after first-quarter sales in the country fell 32% from a year earlier due to heavy price cutting in the market.

Honda Chief Financial Officer Eiji Fujimura said the market for cars with conventional internal combustion engines was shrinking faster than expected. “It’s a very difficult business environment,” he said.

The automaker now expects to sell 3.90 million cars this fiscal year, down from a previous forecast of 4.12 million units. It still expects group motorcycle sales to reach 19.80 million units in the fiscal year.

Honda maintained its revenue and net profit forecasts for the fiscal year ending March 2025. The company still expects revenue to decline 0.6% to 20.300 trillion yen and net profit to decline 9.7% to 1.000 trillion yen.

Rival carmaker Nissan Motor in July also cut its annual vehicle sales forecast, partly because of predictions of weaker sales in China.

Honda and other Japanese automakers have long produced hybrid vehicles, but they have lagged behind companies like China’s BYD and Tesla in the pure-electric segment.

Honda said in May it plans to invest tens of billions of dollars in its electric vehicle strategy through 2030. In China, it will introduce 10 Honda-branded electric vehicle models by 2027, it said.

A weak yen tends to boost profits for Japanese companies like Honda because it makes exports abroad more competitive and raises the yen value of profits earned abroad.

But the prospects for a weak yen driving earnings growth are less clear now, as the Japanese currency has strengthened against other major currencies since early July. The yen last traded around 147 per dollar, down from around 161 per dollar in early July.

–Chieko Tsuneoka in Tokyo assisted in the preparation of this article.

Write to Kosaku Narioka at [email protected]

(END) Dow Jones Newswires

August 7, 2024, 06:31 ET (10:31 GMT)