Great performance for Honda. The second Japanese automobile manufacturer – behind Toyota – generated an annual net profit of 1,107.1 billion yen (6.6 billion euros at current prices) in its 2023-24 financial year, a jump of 70 %, according to a press release. Its annual operating profit climbed even further (+77%) to reach 1,381.9 billion yen, a record level for Honda.
This performance comes from the increase in its sales, a favorable relationship between prices and production costs and positive exchange rate effects, linked to the great weakness of the yen, he explained in a presentation. Its turnover increased by 20.8% to 20,428.8 billion yen (121.8 billion euros).
China, the Achilles heel
Its automobile sales in volume were very dynamic in North America, thanks to its hybrid offering. But they have declined in Asia (excluding Japan), because of China, where Honda is suffering like other foreign manufacturers from competition which has become very strong from local manufacturers, such as BYD, champions of electric vehicles.
Electric car: Chinese BYD wants to become “leader” in Europe by 2030, ahead of Tesla
For 2024/25, Honda forecasts a 9.7% drop in its net profit to 1,000 billion yen, but it expects a further increase in its operating profit (+2.8% to 1,420 billion yen), mainly thanks to to a further improvement in its prices in relation to its production costs. As the group forecasts a new almost stable annual turnover (-0.6% to 20.3 trillion yen), its profitability should further increase slightly with an operating margin of 7%, compared to 6.8% in 2023/24 and 4.6% in 2022/23.
Honda also announced this Friday a new program to buy back its own shares for 300 billion yen (around 1.8 billion euros) for its new financial year.
Becoming 100% electric by 2024
Since 2021, the group has set itself the ambitious objective of becoming 100% electric in its automotive segment by 2040. It thus announced at the end of April an investment of 11 billion US dollars in Canada to build a large manufacturing plant there. electric vehicles and batteries, production of which is expected to start in 2028.
Electric cars: Honda will spend $11 billion for a new factory in Canada
Once fully operational, the factory, built an hour from Toronto, will have a production capacity of 240,000 vehicles per year and the battery plant of 36 gigawatt hours (GWh) per year. The Japanese group estimates that 1,000 jobs will be created and will be added to the 4,200 people currently working in its two manufacturing plants in Ontario. For this project, Honda announced that it would contribute 60 to 70% of the total investment, with the rest coming from joint venture partners and grants. Thus, the Ontario government has committed to paying 2.5 billion Canadian dollars in subsidies to Honda and Canadian Finance Minister Chrystia Freeland announced that state support in the form of tax credits would amount to a similar amount.
New brand
Furthermore, Honda has been associated since 2022 in this sector with the Japanese technology giant Sony, with which it has created a new high-end automobile brand, Afeela, which has however not yet marketed any models. The group has also been discussing a possible strategic partnership in electricity and software since March with its rival and compatriot Nissan. They will initially launch a feasibility study on their prospects for collaboration in automotive software platforms, key components for electric vehicles (such as batteries for example) and other complementary products.
“ Our industry is at a significant turning point » with the arrival of “ new players » in addition to the historic car manufacturers, then recalled the general director of Nissan, Makoto Uchida, during a press conference in Tokyo with his counterpart at Honda, Toshihiro Mibe. “ These emerging brands, with innovative products and new business models, are breaking into the automotive market and seeking to become dominant by capitalizing on their overwhelming price competitiveness and extraordinary speed », added the boss of Nissan in a barely veiled allusion to Chinese electric manufacturers. “ We cannot win this race by keeping a traditional approach “.
Nissan unveiled massive investments last year to manufacture electric vehicles at its Sunderland factory (northeast of England), and also plans to invest 600 million euros in Ampere, Renault’s electric entity .
(With AFP)
