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Motorcycle "cash cow" hedges against weak auto business! Honda (HMC.US) exceeds expectations with help from weak yen: Q1 net profit surges 129%, raises FY2027 guidance

Motorcycle "cash cow" hedges against weak auto business! Honda (HMC.US) exceeds expectations with help from weak yen: Q1 net profit surges 129%, raises FY2027 guidance

智通财经智通财经2026/08/05 08:46
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By:智通财经

Boosted by a weak yen and strong US demand, Honda Motor has raised its full-year forecast.

According to Zhitong Finance APP, Japan's second-largest automaker Honda Motor (HMC.US) released better-than-expected results on Wednesday—its net profit for the first fiscal quarter surged 129.3% year-on-year to 450.9 billion yen (approximately $2.9 billion), and operating profit doubled to 530.8 billion yen, both far exceeding market expectations. This marks the first quarter in six quarters that Honda has achieved year-on-year growth in quarterly profit.

Facing a massive electric vehicle restructuring loss of 2.5 trillion yen and plummeting sales in the Chinese market, Honda used its record-setting quarterly report to prove that its "two-pronged" strategy is offsetting the cyclical weakness in its auto business. Boosted by this, Honda's share price rose 3.9% at the close in Tokyo.

The financial report shows that Honda's operating revenue for the first fiscal quarter reached 6.06 trillion yen (about $38.4 billion), a year-on-year increase of 13.5%, exceeding the market's expectation of 5.87 trillion yen. Operating profit soared to 530.77 billion yen, up 117.4% from 244.17 billion yen a year ago, far above analysts' estimates of 300.16 billion yen. Net profit reached 450.92 billion yen, a year-on-year increase of 129.3%, almost 80% higher than the market expectation of 250.78 billion yen.

This is the first quarterly year-on-year profit growth Honda has seen in six quarters. Pre-tax profit also performed strongly, rising 107.0% to 605.03 billion yen.

Motorcycle

Business Performance

Motorcycle Business: The “Cash Cow” Contributing Nearly Half the Profit

The motorcycle business was the largest profit engine this quarter. This segment contributed about 234 billion yen in operating profit, almost half of the total quarterly profit of 530.8 billion yen.

Strong demand in the Indian and Brazilian markets was the core driver. In major motorcycle markets, Honda's operating profit margin exceeded 16%, far above the industry average. With the strong support of this “cash cow,” Honda was able to buffer the huge financial impact of restructuring in the auto business.

Motorcycle

Automotive Business: China Stagnates, North America Remains Robust, Strategic Pivot to Hybrid Power

The automotive business achieved an operating profit of 192.1 billion yen this quarter, a significant turnaround from last year's operating loss of 29.6 billion yen. Yen depreciation was one of the key factors driving profitability in the automotive segment, as a weaker yen increased the book value of overseas profits when converted into yen.

Despite global auto sales declining and raw material costs rising, the company said tariff impacts were successfully absorbed this quarter. However, the Chinese market remains Honda's biggest pain point, with first-quarter sales down sharply and the company has already cut production capacity at its Guangzhou and Wuhan plants.

Motorcycle

The North American market became the "anchor" of Honda's automotive business. The US market contributed about half of Honda’s global vehicle sales. The weakening yen further magnified the book value of overseas profits. Honda said the tariff impact for the quarter had already been absorbed.

Full-Year Guidance Raised

Based on the yen exchange rate assumption changing from 145 to the US dollar to 155 to the US dollar, and continued strong hybrid demand in North America, Honda raised its full-year operating profit forecast by 30% from 500 billion yen to 650 billion yen. Full-year revenue is expected to rise from 23.15 trillion yen to 24.15 trillion yen (above analysts' forecasts), and net profit is raised sharply from 260 billion yen to 400 billion yen. Full-year dividend per share is maintained at 70 yen.

However, the market remains cautious about this guidance. Analysts on average forecast full-year operating profit at 676 billion yen—although the new guidance is significantly higher, it still slightly lags market expectations.

Motorcycle

Management Perspective: Middle East Situation is the Biggest Source of Uncertainty

At the earnings briefing, Honda CFO Masuo Kawaguchi said that uncertainty over the situation in the Middle East remained the biggest risk factor, and the company must carefully assess risks related to sales and material costs.

After suffering its first annual loss since going public in 1957 last fiscal year, Honda is now seeking to return to profitability through favorable currency movements, robust North American hybrid demand and a strong motorcycle business. Plans to establish an electric vehicle battery supply chain in Canada have been put on indefinite hold, with resources rapidly shifting towards hybrid models.

Strategic Pivot: Hybrid Power Becomes the Core in North America, Electric Push “Braked”

Honda's strategic focus is undergoing a profound shift. Last fiscal year, the company wrote down over $9 billion from a restructuring of its electric vehicle business, and abandoned its previous long-term EV sales targets.

The strategy now pivots to hybrids. Honda plans to launch 15 new hybrid models by March 2030, mainly targeting the North American market. Honda will stop selling its only fully electric model, the Prologue SUV, in the US this year, and its plan to build an EV battery supply chain in Canada has been postponed indefinitely. This signifies a shift from an aggressive electrification strategy to a more pragmatic hybrid-focused approach.

Instead, hybrids become the cornerstone of Honda’s North American strategy. The company plans to roll out 15 new hybrid models by March 2030, mainly for the North American market. Large hybrid models above D-segment will be launched in North America as early as 2029. Meanwhile, plans for an electric vehicle battery supply chain in Canada have been put on indefinite hold.

In the Chinese market, Honda extended its joint venture with GAC Group to 2038 in July, and plans to enhance competitiveness through the adoption of locally standardized parts and local partner platforms.

In the field of software-defined vehicles, Honda and Nissan are advancing the joint development of a central electronic control unit (ECU), aiming to standardize components by around 2029. Honda CEO Toshihiro Mibe has publicly confirmed that both sides are in talks on this collaboration.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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