TOKYO — Under a pile-up of back orders, Honda says its top priority is to get cars to U.S. customers rather than worrying about a slowdown or more stringent electric vehicle credits.
Honda’s Chief Financial Officer Kohei Takeuchi said that there are still many uncertainties looming over the auto sector.
Risks include rising inflation and interest rates in the US, and a semiconductor shortage that Honda predicts will last as early as 2023. Meanwhile, tougher North American manufacturing requirements for a new EV tax credit mean that most of today’s EVs won’t be eligible, he said.
Takeuchi said higher inflation and interest rates will “ultimately have an impact on the economy.” But Honda has an ultra-lean US inventory of just 20,000 vehicles on the market, and its first step will be to fill orders. “Instead of taking immediate measures keeping in mind the slowdown, we have to focus on getting our vehicles to the customers,” Takeuchi said.
Honda is raising US prices in line with inflation. But if a recession strikes, Honda should be able to weather the storm by further controlling fixed costs, Takeuchi predicted.
Speaking at the announcement of Honda’s quarterly financial results, Takeuchi said that more stringent strings attached to EV incentives under the proposed Inflation Reduction Act will not prevent Honda from rolling out EVs even if the initial wave doesn’t qualify for the brakes. .
Qualified EVs will have to be manufactured in North America without relying on Chinese batteries.
“Existing models may not qualify,” Takeuchi said. “But we want to aim for carbon neutrality. Therefore, we would like to launch an EV before it is factory qualified.”
Honda has not sold any EVs Stateside yet. But Japan’s No. 2 automaker said in April it would invest 5 trillion yen ($36.67 billion) in electrification over the next 10 years as it rolls out 30 complete EVs globally and 2 million EVs annually by 2030. Builds production capacity for.
By 2030, it plans to manufacture 800,000 EVs locally in North America.
Takeuchi’s assessment came as Honda Motor Co. reported financial results for the first quarter of the fiscal year ended June 30. Hit by a drop in production and declining sales, Honda said operating profit fell 8.6 percent to 222.2 billion yen ($1.63 billion) in the period.
The ongoing semiconductor shortages in China as well as pandemic-related lockdowns have led to a reduction in production. Meanwhile, the high cost of raw materials decimated income.
A profitable foreign exchange rate was the biggest tailwind for Japan’s No. 2 automaker.
The Japanese yen’s dramatic weakening against the US dollar and other currencies added 64.2 billion yen ($470.8 million) to the bottom line in the April-June period.
Quarterly net income fell 33 percent to 149.2 billion yen ($1.09 billion).
Worldwide sales declined 18.3 percent to 815,000 vehicles in the quarter. Shipments in North America fell 23 percent to 267,000 vehicles, as European volumes fell 18 percent to 23,000 units.
Honda said production is already rebounding with the resumption of activity in Shanghai. And it predicts that it could make up for a weaker fiscal year in the first quarter in the rest of the fiscal year.
It held steady its earlier outlook for sales of 4.2 million vehicles in the current fiscal, which ends March 31, 2023. This represents an increase of 3.1 percent over the previous financial year.
Honda boosted its operating profit outlook for the current fiscal, citing unexpected foreign exchange rate fluctuations. But the new target is still 4.7 percent lower than a year ago.