Honda Motor Co. is forecasting a 3% drop in profit this year, even though the company expects their global car sales to increase 7.7 percent to a record 3.395 million vehicles. The company cites an expected rise in the yen, and a global shift to lower-margin small cars as a few of the reasons for the decline in profits.
Honda is now Japan’s No.2 automaker after the company stole the spot from Nissan last year. The popular CR-V, Fit and new Accord will drive sales this year.
The automaker is forecasting net profit will be $4.86 billion (575 billion yen) for the year, which is below the predicted profit of $6.48 billion.
“All in all, if you strip out currency headwinds and other special factors, our business should grow this year,” Executive Vice President Satoshi Aoki told a news conference.
Even with the currency issues the fact that the market no longer desires larger more profitable vehicles is hurting profits. All automakers across the board are being forced to offer incentives on SUVs and trucks that usually provide a significant amount of profit for the automakers. Currently Honda is spending about $2,000 on every Ridgeline truck and more than $1,000 on the Pilot SUV in the U.S. The company is hoping to reduce that amount to less than $900 per vehicle.
Even though the Honda has seen a decline in their overall profits, the company is still expected to have a steady amount of growth thanks to the number of fuel-efficient vehicles they offer. Honda is also going to add more production capability in the North America next year with a new factory in Indiana.
Full Story: Automotive News
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