Hybrid sales drive up Honda profits by 23%

Honda said its global vehicle sales grew 2% to 1.9 million over the first six months of the year, largely due to a 9% rise in sales in the US. 

Japanese carmaker Honda reported a 23% increase in profit during the first three months of its latest financial year as the company benefited from a weaker yen, higher pricing and growing hybrid vehicle sales in the US. and its home market.

Japan's second-biggest carmaker said quarterly operating profit totalled 484.7bn yen (€3bn) in the April-June period, compared with an average estimate from analysts of 472.4bn yen.

The company maintained its full-year operating profit forecast of 1.42tr yen, while slashing its sales outlook for China by 21% to 840,000 vehicles for that period.

Honda said last week its global vehicle sales grew 2% to 1.9 million over the first six months of the year, largely due to a 9% rise in sales in the US, its top market.

In contrast, it faced heavy headwinds in China where it saw sales slump 23% to 416,000 vehicles.

In China, Honda has been suffering from heavy price competition and a faster-than-expected decline in the market for internal combustion engine vehicles, the company’s chief financial officer Eiji Fujimura told an earnings briefing.

Honda said earlier in July that it will close a factory in the world's biggest auto market and halt vehicle production at another plant amid intense competition from newer Chinese auto brands.

It plans to start production at two new electric vehicle plants in China run through two joint ventures with Chinese automakers later this year.

Honda is seeking to catch up with faster-moving global rivals in the shift to battery-powered electric vehicles, for which it is looking to profit from cooperation with rival Japanese automaker Nissan.

The companies said they had agreed to research technologies for a next-generation software platform together and sought to cooperate in areas such as batteries, e-axles and vehicle complementation.

Honda is not the only company facing difficulties in China.

Last week, German carmaker Volkswagen announced that it will need to make “significant cost-cutting efforts" in the second half of the year and beyond if it is to revive profit margins.

Volkswagen is revamping its line-up globally with bespoke electric car models in particular for the Chinese and US markets.

BMW also reported a lower-than-expected profit margin in its core automotive segment during its second quarter, hitting its shares amid heightened competition and weaker demand in China.

Reuters