What Honda Motor (HMC) Said on Its Q2 Earnings Call

Key Points

• Honda raised its fiscal 2027 operating profit forecast by JPY 130 billion to JPY 780 billion and its shareholder profit forecast by JPY 100 billion to JPY 500 billion, citing strong motorcycle earnings and North American demand for fuel-efficient cars. First-half operating profit increased to JPY 648.7 billion, though the company cautioned that one-time gains would not recur.
• Motorcycles were a key growth driver: first-half sales reached a record 11.9 million units, while automobile sales declined, particularly in China. Honda plans to expand North American vehicle capacity to 1.91 million units by 2029 with a new Ohio plant focused primarily on hybrids, and raise Brazil motorcycle capacity to 2.3 million.
• Honda kept its full-year EV-related loss estimate at JPY 520 billion and expects JPY 360 billion in cost increases, which it will work with suppliers to reduce. Its annual dividend forecast remains JPY 70 per share.

Honda Motor NYSE: HMC raised its full-year operating profit forecast after strong motorcycle sales and North American demand for fuel-efficient cars helped lift first-half earnings, although executives warned that one-time gains would not be repeated in the second half.

The automaker now expects operating profit of JPY 780 billion for the fiscal year ending March 31, 2027, up JPY 130 billion from its previous forecast. It also raised its forecast for profit attributable to shareholders by JPY 100 billion to JPY 500 billion.

For the six months ended Sept. 30, operating profit rose JPY 210.5 billion from a year earlier to JPY 648.7 billion. Excluding JPY 484.8 billion in electric vehicle-related losses, adjusted operating profit increased JPY 471.7 billion to JPY 1,133.6 billion.

Director and Executive Vice President Noriya Kaihara said the first-half result reflected strong motorcycle and automobile earnings as well as nonrecurring gains. He cautioned that rising costs, geopolitical risks and other uncertainties had been factored into the second-half outlook.

Motorcycles and North America Drive Results

Honda sold 11.9 million motorcycles in the first half, a record for the period, with gains in markets including India and Brazil. Automobile unit sales fell to 1.569 million, primarily because of lower sales in Asia, particularly China. Power product sales declined to 1.632 million units, mainly because of weakness in North America.

Despite the overall decline in automobile sales, Kaihara said demand for compact cars and fuel-efficient vehicles, including hybrids, had risen in North America as gasoline prices increased. Chief Financial Officer Masao Kawaguchi said higher North American automobile sales contributed to the improvement in adjusted operating profit.

Motorcycle operating profit rose JPY 70.7 billion to JPY 439.1 billion. The automobile business recorded a JPY 5.7 billion operating loss after EV-related losses; excluding those losses, it generated JPY 479 billion in adjusted operating profit. Financial services operating profit was JPY 210.9 billion.

Kawaguchi said foreign exchange movements added JPY 148.3 billion to first-half adjusted operating profit, while tariff-related one-time factors, including refunds, added JPY 97 billion. He also said a JPY 40 billion reversal of provisions related to a lawsuit reconciliation was included in the revised outlook and had not been expected when Honda prepared its initial plan.

Ohio and Brazil Capacity Plans

Honda plans to build a new automobile plant in Ohio to meet growing North American hybrid demand. The company aims to increase its total North American vehicle production capacity to 1.91 million units in 2029 from 1.67 million currently. It also plans to progressively introduce multiple large hybrid models from 2029.

Kaihara said existing North American plants were operating near full capacity and that Honda lacked sufficient capacity to meet demand for large models such as the Pilot, Passport and MDX. The new plant will be designed primarily for hybrids but with flexibility to produce gasoline vehicles and EVs in the future, he said.

Before the plant opens, Honda will consider changes to shifts and work arrangements with suppliers to make the most of existing capacity. Kaihara said those measures might generate additional production in the tens of thousands of units, although the company could not count on that immediately.

Honda also plans to expand motorcycle capacity at its Manaus plant in Brazil to 2.3 million units in 2029 from 1.6 million, in response to demand in Brazil and overseas.

Second-Half Costs and EV Losses

Honda maintained its full-year estimate for EV-related losses at JPY 520 billion. Kawaguchi said discussions with suppliers had progressed enough to support a more reasonable estimate, though talks and further scrutiny would continue. The company hopes to conclude the loss-related matters by fiscal year-end, he said.

Kawaguchi also said Honda was retaining its initial expectation of JPY 360 billion in cost increases for the full year. The company would work with suppliers to reduce costs because passing the entire increase on to customers was not realistic, he said.

For the full year, Honda expects sales of 23.3 million motorcycles, 3.16 million automobiles and 3.6 million power products. Its adjusted operating profit forecast, excluding EV-related losses, is JPY 1.3 trillion, up JPY 130 billion from its prior projection. The annual dividend forecast remains JPY 70 per share.

In China, Kaihara said Honda had lowered its sales expectations as higher gasoline prices accelerated a shift toward EVs and made conditions difficult for internal combustion vehicles. He said the company plans to use joint venture platforms and local resources to develop EVs and improve competitiveness, although that transition will take time.

About Honda Motor (NYSE:HMC)

Honda Motor Co., Ltd. is a Japan-based manufacturer of automobiles, motorcycles and other mobility products. Its vehicle lineup includes passenger cars, SUVs and electrified models, while its motorcycle business serves consumers and commercial users in markets around the world. The company also makes power equipment, marine engines and other products, and provides financial services that support vehicle and equipment sales. Honda's aviation subsidiary, Honda Aircraft Company, develops and manufactures the HondaJet business aircraft.

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