Honda lifts full-year earnings forecast on good foreign exchange, higher U.S. sales, better pricing

TOKYO – Honda Motor Co.’s profit climbed by almost a third in the latest quarter on higher vehicle sales and better pricing, prompting the Japanese automaker to lift its earnings forecast.

Booming demand in the U.S. as well as rebooted production because of a free-flowing semiconductor supply helped drive the company’s earnings growth, Executive Vice President Shinji Aoyama said.

“We have no such problems today at all,” Aoyama said of the chip supply chain. 

Speaking at the company’s financial results announcement Thursday, Aoyama warned, however, that U.S. demand is softening slightly. And Honda trimmed its full-year forecast for North America.

Japan’s No. 2 automaker expects to sell 25,000 fewer vehicles than previously targeted in the fiscal year to March 31, 2024. It now predicts 1.62 million vehicles, up from 1.2 million the year before.

Regarding Honda’s partnership with General Motors-backed Cruise automated driving unit, Aoyama said Honda has not altered its plans to commercialize driverless taxis in Tokyo.

Honda, GM and Cruise said last month that they would launch the service in 2026. Since then, Cruise has come under fire from U.S. regulators for its handling of accidents and safety data. This month, GM said it would temporarily pause Cruise’s driverless operations in the U.S.

“There is no change in our plans so far,” Aoyama said of the companies’ plans to move ahead with a Japanese launch. “But the situation in the U.S. needs to be monitored closely.”

Honda and GM also decided to abandon plans to jointly develop an affordable EV in the latter half of the decade because of differences over the market potential and pricing. Honda will use its internally developed platform for affordable EVs from 2026, Aoyama said.

Operating profit at the automaker increased 31 percent to 302.1 billion yen ($2.02 billion) in the company’s fiscal second quarter ended Sept. 30, compared with 278.4 billion yen ($1.84 billion) a year earlier, Honda said in the report.

Revenue advanced 17 percent to 4.98 trillion yen ($33.37 billion) in the three-month period, while global sales increased 6.5 percent to 1.03 million vehicles in the quarter.

Deliveries in North America, Honda’s second-biggest market, fueled the increase. Deliveries there zoomed ahead 40 percent to 385,000 vehicles, helping power Honda through the quarter.

Sales in Asia declined 13 percent to 446,000 units on crumbling demand in China, and deliveries in Europe added only 1,000 units to 23,000 vehicles in the three months.

Citing weak demand in China, where customers are turning away from Japanese brands in favor of electric vehicles made by local automakers, Honda lowered its full fiscal year unit-sales forecast.

Honda now expects to sell 4.1 million vehicles worldwide in the current fiscal year ending March 31, 2024. That trims 250,000 vehicles from Honda’s previous forecast. But the new, lower goal still represents an 11 percent increase over the previous year’s 3.7 million vehicles.

Nevertheless, Honda raised its fiscal year revenue, operating profit and net income outlooks, because of beneficial foreign exchange rates. The Japanese yen’s weakening against the dollar and other currencies boosts the value of overseas revenues repatriated back home.

Honda now expects operating profit to jump 54 percent to a record 1.20 trillion yen ($8.04 billion) in the current fiscal year ending March 31, 2024.

The automaker forecasts net income to increase 43 percent to 930 billion yen ($6.23 billion). Revenue is seen rising 18 percent to an all-time-high of 20 trillion yen ($134 billion).