Japanese automotive giant Honda has lowered its annual profit forecast by 20 percent due to the global chip shortage, additional tariffs imposed by the US, and the rapid rise of Chinese electric car manufacturers in the Asian market.
Honda lowers profit forecast
Following this decision, the company also revised its global sales targets. Honda estimated that the US tariffs had cost them approximately $2.6 billion and explained that a supply shortage of chips from Netherlands-based Nexperia had also negatively impacted production.
Immediately following this announcement, the company’s shares fell 4.7 percent. However, analysts believe Honda’s primary concern was not short-term cost pressures but the rapid rise of Chinese electric vehicle manufacturers in the Asian market.
For many years, Japanese brands, which held a virtually unrivaled position in key regions like Thailand, Indonesia, and Malaysia, are now facing fierce competition from low-cost electric vehicles from Chinese brands like BYD.
In light of these developments, Honda’s sales target for Asia has been lowered from 1.09 million to 925,000. This revision means that sales in the region are expected to decline by more than 10 percent.
The company’s lack of a new model plan for next year could further accelerate its market share loss. Sales in Thailand fell by 12 percent in the first nine months of the year, 30 percent in Indonesia, and 18 percent in Malaysia.
Faced with this negative outlook, Japanese automakers have turned their attention to the Indian market. Honda plans to establish a new base for electric car production and exports in this country, where Chinese manufacturers have not yet established a strong presence.
Toyota and Suzuki have previously taken similar steps, announcing a combined investment of $11 billion. Japanese analyst Yoshio Tsukada notes that Honda’s profitability in its automobile division lags far behind that of its motorcycle division.
The company’s automobile division has reported losses for three consecutive quarters, while its motorcycle division has achieved record profits. Tsukada states that the motorcycle division alone can achieve global success, but that the automobile division is currently struggling, demonstrating “Honda’s structural weakness.”
