Asia Picks Up North American Slack as Honda Posts Profit Increase
Exchange rates seriously hurt Japanese manufacturers over the past year as the yen bobbed and weaved following 2015’s surge. However, Honda was not among them. The final quarter of 2016 saw the automaker posting a 27 percent earnings increase, despite being hammered by the same foreign exchange losses as the rest of its Pacific brethren.
The first quarter of 2017 appears to have shaped up much the same way, only with slimmer margins — exactly as Honda predicted. Knowing that the North American market was about to take a turn for the worse, company analysts clung to the hope that more favorable currency rates and higher-than-expected sales in Asia would keep operating profits out of the red. Earnings ultimately creeping ahead by 0.9 percent to 269.21 billion yen ($2.40 billion) for Q1 — no thanks to the United States.
Honda’s first quarter sales were down in North America against last year’s numbers, with the largest disparity occurring in April. But it wasn’t nearly as devastating as some had predicted. While the manufacturer suffered an overall loss in volume within the United States, Canada actually posted more deliveries month-over-month — yielding some of the company’s best monthly figures on record.
According to Automotive News, Europe also took a pass on Honda’s offerings, continuing the progression of its dwindling market share within the continent. The automaker accounted for nearly 2 percent of all vehicles sold in the EU for 2007, but that number was halved by 2015.
Thankfully, Asia was willing to pick up the slack as quarterly sales rose 7 percent to 3.71 trillion yen. Honda claimed global retail sales increased 4.5 percent to 1.3 million vehicles.
While the Takata airbag recall remains a cause for concern, Honda’s decision to distance itself from the issue, as well as its cost-cutting measures, seems to have softened the blow. Lingering trouble from the Takata fallout (additional recalls and lawsuits are expected) isn’t anything Honda can’t manage financially.
Among Honda’s rivals, Nissan Motor Co. reported a 1 percent drop in April-June profit at 134.9 billion yen ($1.2 billion), despite strong sales. Toyota Motor Corp. will release its earnings report on Friday and is desperately hoping for a budgetary win.
[Image: Honda]
A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.
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I was in China at the end of last year and noticed that Honda, Toyota and Nissan seemed to be the most popular foreign brands there, especially in southern China (Guangzhou area). Honda may have been the most popular. I was also in Shanghai and Beijing but can't remember what the mix was there. I think European brands were more common in Beijing and Shanghai than Guangzhou (richer population, I guess) but there would have still been plenty of Japanese makes. I also saw many Buicks. It's pretty amazing how many home-grown brands and cars they have though. And they don't look all that badly made. I doubt they have top notch crash safety but a lot of the home brands are joint ventures with foreign manufacturers, which should help. Cars are becoming popular in China as the middle class is now able to afford them. That's a lot of potential sales.
The build quality of the Chinese and European brands can't match Honda yet.