China makes Honda lower its full-year net profit forecast by a fifth

Article by Christian A., on October 30, 2012

Due to the backlash against Japanese products in China, Honda Motor Co. lowered its full-year net profit forecast by a fifth. Honda expects that it may be February before the market in China normalizes. This reduction in the market is the result of protests over a territorial dispute in the East China Sea.

It’s highly possible that other Japanese automakers, Nissan Motor and Toyota Motor, would also cut their predictions when they post their quarterly earnings early next week.

Fujio Ando, managing director at Chibagin Asset Management, said that Toyota and Nissan would probably reduce their forecasts too. He explained that this is because the current issues in China weren’t considered as factors in the forecasts.

In September, the demand in China for Honda, Toyota and Nissan cars declined as the dispute worsened, with South Korea's Hyundai Motor and Germany's BMW increasing their market shares. Toyota said that its sales in China fell by 49% in September. Last month, sales by Honda and its China joint ventures decreased by 40.5%.

China made up 17% of Honda’s 2011 sales, its No. 2 market after the U.S. On Monday, Honda announced that its two largest plants in China would continue to operate on one shift instead of two, until at least mid-November.

Output is expected to go up ahead of Chinese New Year in February - a traditional buying season. It lowered its full-year China sales prediction by 17% to 620,000 vehicles, but said that there won’t be any change to the investment in the country. Honda is planning to invest $880 million to increase its capacity at its plants located in Guangzhou and Wuhan in the next several years.

Topics: honda, china, profit

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