Honda’s Q3 performance a mixed bag: more operating profits, fewer sales

Last Friday, Honda published its third quarter financial summary, revealing impressive gains in operating profits but disappointing sales and limited production.

The automaker’s operating profits grew 21% from the previous quarter, from 231.2 billion ($1.8 billion) yen in Q2 to 280.4 billion yen ($2.1 billion) in Q3. Year-over-year, its operating profits grew 22%, from 229.4 billion yen ($1.7 billion) in Q3 of 2021.

Although the brand touted its financial prowess, it acknowledged the declining sales of automobiles and power products in its summary (without providing an official number), attributing the decrease to “the semiconductor supply shortage and the impact of COVID-19 in China.” The report also noted that manufacturing and materials had become more expensive.

While fewer sales and more operating profits may seem contradictory, Honda explained that better motorcycle sales and “favorable currency effects” contributed to its net gain. The brand did sell roughly 350,000 more motorcycles in Q3 than it had during the same time period the year before, and according to Bloomberg, the strength of the yen has grown considerably since October, when its purchasing power hit a 30 year low.

The automaker is right to focus on the good news, but the report still casts doubt on the sustainability of its growth. Without better sales, operating profits have limited potential to increase. Although it is true that the brand has been hit harder than most by economic headwinds and global supply chain disruptions, these issues also began to resolve early in 2022, leaving one to wonder how other international brands reported sales records in the final months of the year while Honda fell behind. Nevertheless, the company has plenty of time to catch up with the market’s best performers, however investors and retailers alike will be closely following its sales data in early 2023. According to January data, the company is so far climbing in relation to some of its competitors.

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