Honda Joins Rivals Predicting Challenges Ahead for Auto Industry
(Bloomberg) -- Honda Motor Co. joined the list of carmakers projecting challenges for the global auto industry hit by a trade war -- though a weaker yen is helping the Japanese brand weather some of the storm.
The Japanese company on Thursday lowered its revenue forecast for the fiscal year as it shaved 75,000 vehicles off its sales projection for North America, citing a flood at a plant in Mexico. Still, Honda raised its full-year earnings projection slightly, helped by a lower yen.
Sales are sputtering in China, where consumers are holding back on car purchases after tariff changes brought about by the trade war caused pricing confusion. In North America, demand is waning for sedans and and at home the carmaker is facing stiff competition from Nissan Motor Co. and Toyota Motor Corp.
Last week, manufacturers including General Motors Co., Nissan and Daimler AG all detailed the injury they face under the escalating tariff battle between U.S. President Donald Trump and his counterparts abroad. Hyundai Motor Co. reported earnings that missed estimates and said that an extended trade dispute could weaken car demand and weigh on economic growth in China.
Honda cut its full-year revenue forecast to 15.45 trillion yen ($139 billion) from 15.6 trillion yen. North American sales are now expected to be 1.94 million units, as opposed to the 2.015 million units predicted earlier.
In the U.S., Honda may be spared the worst of the tariff impact, as about 75 percent of the vehicles it sells in the country are built there, according to Bloomberg Intelligence. Honda makes about 1.2 million vehicles a year in the U.S., similar to what Toyota builds in the country. Honda’s sales in the U.S. amounted to more than 1.6 million units last year, compared with Toyota’s 2.4 million.
Operating profit will probably be 710 billion yen in the fiscal year through March, Tokyo-based Honda said. Three months ago, the company forecast 700 billion yen. It’s now basing its forecast on an exchange rate of 107 yen to the dollar, compared with 105 yen previously. The flooding at the plant in Celaya, Mexico, and a resulting production halt lowered the earnings forecast by 50 billion yen.
In the fiscal first quarter through June, operating profit rose 11 percent to 299.3 billion yen. Analysts predicted 253.7 billion yen, the average of estimates compiled by Bloomberg.
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