Introduction
Honda is Japan’s second-biggest carmaker. On Tuesday, November 10, it shared mixed news. Its profit for the last three months fell sharply. But it raised its forecast for the full year. A forecast is a company’s best guess about its future money.
What Happened
Honda’s operating profit for July to September fell 39% from a year ago. Operating profit is the money a company makes from its main business. It was 118 billion yen, or about $747 million. Experts had expected 250 billion yen. So the result was far below hopes. The main reason was the cost of pulling back from electric cars. Honda booked 484.8 billion yen, or about $3.07 billion, in EV costs in the quarter. Even so, Honda raised its full-year operating profit forecast to 780 billion yen, or about $4.94 billion. The old forecast was 650 billion yen. That is a rise of 20%. It also raised its net profit forecast to 500 billion yen from 400 billion yen.
Key figures:
- Q2 operating profit: 118 billion yen ($747 million), down 39%
- EV costs in Q2: 484.8 billion yen ($3.07 billion)
- Full-year operating profit forecast: 780 billion yen ($4.94 billion), up 20%
- Full-year net profit forecast: 500 billion yen (from 400 billion yen)
- First-half net profit: 516.76 billion yen ($3.3 billion), up 66%
Why It Happened
Two things helped Honda. First, its hybrid cars sell well in the United States. A hybrid car uses both petrol and a battery. Second, the yen is weak. The yen is Japan’s money. A weak yen makes Honda’s foreign sales worth more in yen. Honda is also moving more car production to the United States. That helps it deal with US tariffs. A tariff is a tax on goods that cross a border. But there are weak spots too. Car sales in China are falling. And the EV pullback is costly. Honda kept its full-year EV cost estimate at 520 billion yen, or about $3.29 billion.
Why It Matters
The numbers tell two stories at once. Honda’s car business is doing better than people feared. Its first-half net profit rose 66% to 516.76 billion yen, or about $3.3 billion. Strong motorcycle sales helped. A motorcycle is a two-wheel motorbike. But the EV shift is painful. Honda’s finance chief said the company expects to settle most of the remaining EV costs this year. The company also cut its full-year car sales forecast by 7%, to 3.16 million vehicles. Shares in Tokyo fell 1.6% on the day. Investors saw the weak quarter first. The higher forecast came second. In the United States, cheaper cars are selling fast, and Honda’s hybrids fit that demand.
What Happens Next
Honda’s finance chief says talks with suppliers are going well. The company will keep cutting EV costs. It also hopes hybrids keep selling well in the United States. The new forecast is still below what experts expect. Experts expect about 839 billion yen in operating profit. So Honda must prove it can hit its own number.
Final Thoughts
Honda’s quarter was weak. Its year may still be strong. Hybrids and a weak yen are doing the heavy work. The EV bill is big, but Honda says most of it will be paid this year. The next few months will show if the plan holds.
Quick Questions
Why did Honda’s profit fall in the last quarter?
Honda booked 484.8 billion yen ($3.07 billion) in EV restructuring costs.
How much did Honda raise its forecast?
It raised its full-year operating profit forecast to 780 billion yen, up 20% from 650 billion yen.
What helped Honda’s business?
Strong US hybrid sales and a weak yen helped, along with moving more production to the United States.
Disclaimer: This article is for educational and informational purposes only and does not constitute financial advice.
Sources: Reuters and Associated Press.
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