Honda boosts profit forecast
Sales to remain flat in US
MOTORCYCLE riders are keeping the cash counters humming at Honda, while American car buyers are playing hard to get.
The world’s biggest maker of scooters and motorcycles said customers in India are lining up in bigger numbers than ever before to buy its Activa and Dio scooters. So much so that Honda is boosting production capacity in the country to 12 units every minute.
Buyers of two-wheeled vehicles in India and cars and SUVs in China are helping chief executive Takahiro Hachigo, 58, mitigate the increasing incentives he is having to offer buyers from New York to San Francisco to take home the Accord and Civic models.
With the weaker yen acting as a tailwind, the manufacturer yesterday boosted its profit forecast for the year even as it predicted sales numbers for vehicles to remain flat in North America. It also announced a ¥90 billion (R11 billion) share buyback.
A decade of strong economic growth is lifting demand from millions of Indian families who buy a scooter or motorcycle as their first vehicle. Honda has more than doubled its sales in the country and said yesterday it’s adding a fourth production line in its third factory producing such vehicles.
India, the second-most populous country, is also the world’s fastest-growing major vehicle market.
Honda is poised to move past Nissan as the number-one carmaker in China as the Avancier and UR-V lure buyers.
Honda predicted motorcycle sales to rise 2 percent in the fiscal year ending in March while vehicle sales will advance by 0.9 percent.
Honda is poised to move past Nissan as the number-one Japanese carmaker in China as the Avancier and UR-V fullsize sport utility vehicles lure more buyers.
Nissan, which has been the biggest Japanese carmaker in China since 2009, will be reporting its earnings next week, along with Toyota.
“The situation is we can’t meet demand” in China, executive vice-president Seiji Kuraishi said. In the second half, “we will remain robust but we can’t expect too much growth because production can’t keep pace with demand”, he said, adding the company may end the year with 1.39 million units in sales in the country.
In contrast to surging motorcycle sales in India is Honda providing incentives in the US. Honda’s sales in the US, the carmaker’s largest market, rose 0.3 percent through September. That in part was aided by Honda giving $1 963 (R27 575) in incentives per car in the first nine months this year, up 18 percent from a year earlier.
The industry average for incentives was $3 611, according to researcher Autodata Corp. Honda predicted that full-year North American car sales will stay unchanged at 1.92m units.
“The biggest miss is the US market,” said Tomoichiro Kubota, an analyst at Matsui Securities.
“China is playing a central role to Honda’s earnings now, but I don’t think that’s enough to make up for a plateauing US market.”
Honda said full-year operating income in the year ending in March could be ¥745bn, raising it from the ¥725bn forecast in August.
Honda’s new forecast compares with the ¥800bn average estimate in a Bloomberg survey of 21 analysts.
Honda also announced it will buy back up to 1.3 percent of its shares and pay a full-year dividend of ¥96 per share. It also said it was amending the shareholder return policy, targeting a 30 percent dividend payout ratio.
Shares of Honda rose 1.5 percent to ¥3 576 in Tokyo trading before the earnings announcement.
The stock has gained 4.7 percent this year, compared with a 2.3 percent advance for Toyota and 5.7 percent drop for Nissan.