Japanese automaker Honda Motor Co.’s glass is half full in 2021, raising its full-year operating profit forecast to 520 billion yen, or $5 billion, during the company’s Q3 earnings call Tuesday.
The reason for the optimism is strong demand in China and other markets, plus the positive impact of cost-cutting measures the automaker implemented in the last year. Honda enjoyed record-setting production levels outside of Japan in December, including in China and other parts of Asia.
Revised up from 420 billion yen, or about $4 billion, the new prediction pushes past analysts’ expectations. The updated and improved forecast comes in spite of production cuts at Honda — and many other automakers — due to the shortage of semiconductors.
Production slow down hits
The cuts come at a terrible time for the automaker, which reported auto sales for the quarter ended Dec. 31 were up in its home market, led largely by its new mini vehicle, the N-Box, which was the best-selling vehicle in the mini vehicle category in December. The company sold 13,427 of the new vehicles.
The result is an increase in third-quarter revenue by its automotive business of 2.64 trillion yen ($25.2 billion), a jump of 63.2 billion year over year, for the company’s fiscal third quarter. The company said it saw an operating profit of 123.1 billion yen ($1.2 billion), an improvement of 89.4 billion compared with year-ago results.
Combined with operating profit from financial services business related to automobile sales, the estimated operating profit for automobile business is 205.4 billion yen, the company noted. Honda officials said they expect to sell 4.5 million cars globally during its fiscal year, which ends March 31. That’s down from its early target of 4.6 million units.
Semiconductor shortage issue
It appears that much of that can be tied to the ongoing semiconductor shortage. Honda cut production last month by about 4,000 units, mainly affecting its Fit and Jazz models, Reuters reported. It also reduced output of five models at five facilities in the United States and Canada. China’s GAC said its joint venture with the automaker had received warnings on supply of certain models, the publication noted.
Seiji Kuraishi, Honda executive vice president and COO, noted that while sales in China were strong, the company’s other large market, the U.S. wasn’t faring as well.
“Regarding the total market in the U.S., due to the statewide resumption of the economic activities since May, the market is on recovery trend slowly,” he said during the earnings call. “However, the nine months cumulative results stayed below the same time last year. Honda also is on recovery, mainly with CR-V, Civic and Pilot. Nine months cumulative result was almost equivalent to that of the market.”