March 29, 2024

Honda Cuts Full-Year Outlook Over Anti-Japan Sentiment in China

The cut, prompted by a slump in sales amid often-violent protests in a dispute about the ownership of islands in the East China Sea, raises the possibility that Honda’s bigger Japanese rivals, Nissan Motor and Toyota Motor, may follow suit when they report quarterly earnings early next week.

“It’s likely Toyota and Nissan are going to cut forecasts in the same way. A cut was to be expected because the problems with China weren’t factored into forecasts,” said Fujio Ando, managing director at Chibagin Asset Management.

Demand for Honda, Toyota and Nissan cars declined in China in September as tempers flared in the territorial dispute. Hyundai Motor of South Korea and BMW of Germany picked up market share. Toyota has said its sales in China dropped 49 percent in September.

Sales by Honda and its China joint ventures dropped 40.5 percent last month. China is Honda’s second-biggest market after the United States, accounting for 17 percent of 2011 sales.

Honda said Monday that its two biggest Chinese plants would continue to run on one shift, rather than two, until at least the middle of next month, with output then gradually picking up before Lunar New Year in February, a traditional buying season. It cut its full-year forecast for sales in China by 17 percent to 620,000 vehicles but said there would be no change to its investment there. Honda plans to invest $880 million to expand capacity at its plants in Guangzhou and Wuhan over the next few years.

“China is the world’s biggest auto market and there’s no doubt it will continue to grow” Tetsuo Iwamura, the company’s executive vice president, told a results briefing. “We will continue our current” investment plan.

Honda, whose models include the Accord, Fit/Jazz, Civic and CR-V, cut its net profit forecast for the year ending in March to ¥375 billion, or $4.7 billion, from ¥470 billion. Last year, Honda reported net profit of ¥211.5 billion. It also cut its forecasts for annual operating profit and revenue, citing uncertain markets in China, Europe and India.

Shares in Honda — which fell 15 percent to near nine-month lows amid the China protests — ended 4.7 percent lower, at ¥2,399, their biggest one-day fall in nearly five weeks.

Article source: http://www.nytimes.com/2012/10/30/business/global/honda-cuts-full-year-outlook-over-anti-japan-sentiment-in-china.html?partner=rss&emc=rss