Honda's North American sales were down 6% in the most recent quarter due, in part, to a sluggish start to Fit production in Mexico.
Despite a sales decline in its largest market, North America, Honda posted a $1.94 billion (198 billion yen) operating profit last quarter by cutting costs and expanding sales in other markets, particularly Asia.
The company’s net income jumped 20% while its sales rose just 5%, the company reported. Honda benefitted from the final push of vehicles on back order due to a rush of sales that came before a sales tax hike on April 1.
Sales in North America, which accounts for about half of Honda’s revenue, fell nearly 1% through the first six months of the year and 6% for the second quarter of the calendar year, which is the maker’s first quarter.
Honda’s plant in Mexico, which makes the Fit subcompact, saw delays as it implemented new manufacturing processes, but the Japanese maker declined to change its sales target of 1.6 million vehicles for the year as it expects volumes to improve. The company also noted sales of the new Acura TLX were affected by a slow start as well.
Not only are the sales in North America sluggish, they’re more costly for Honda as incentives have increased in North America. As a result, the Japanese maker has put a focus on growing sales in other markets as a result.
In particular, the maker introduced vehicles specifically designed for the Chinese, Indian and Indonesian markets. Honda’s done particularly well in China given the recent issues between the two countries over a territorial dispute of series of islands.
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The maker posted a record sales year in China last year, based on sales of two vehicles designed specifically for buyers in that country. Honda also introduced a less expensive version of the Accord, which had seen sales steadily decline during the last three years after being the best-selling vehicle in China. The cheaper Accord is also selling very well.
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Honda expects to sell 900,000 vehicles this year with sales rising to 1.3 million units in China by the end of 2015. Through the first half of the year, the maker’s China sales are up 11.7%.
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Efforts like those in China helped Honda to a 21% increase in operating profit to 65.3 billion yen, in Asia. The automaker’s sales jumped 40% in the second quarter of this calendar year to about 40,000 units in India. In Indonesia, sales rose 68% to more than 82,000 vehicles.
Buoyed this success, Honda raised its forecasts for revenue and operating profit for the year. It also suggested net income will likely rise slightly to $5.9 billion (600 billion yen) for the year, which ends March 31, compared with the $5.8 billion (595 billion yen) the company previously forecast.