According to Honda, you might be in your Element if you do you Civic duty and get Fit. Honda Motor is Japan's #2 automaker (after Toyota) and the world's largest motorcycle producer. The company's car models include the Accord, CR-V, Civic, Element, and Fit; gasoline-electric hybrid versions of the Civic and Accord; and seven models of the luxury Acura line. Honda's line of motorcycles includes everything from scooters to superbikes. The company also makes a line of ATVs and personal watercraft. Honda's power products division makes commercial and residential machinery (lawn mowers, snow blowers, and tillers); portable generators; and outboard motors. Almost 70% of Honda Motor sales come from outside Japan.
The company's strong sales in fiscal 2011 left the days of the global economic recession in Honda's rearview mirror. Sales were down in both fiscal 2009 and 2010 while the automotive industry took a hit. However, as the economy improved and the value of the Japanese yen grew stronger, Honda saw its overall sales grow 4% in its native currency and 16% in US dollars. The company sold 3.5 million passenger vehicles (up 3%) and more than 11 million motorcycles (up 18%) in fiscal 2011. To top it off, profits doubled to $6 billion.
Unfortunately, fiscal 2012 was affected by two major natural disasters in Asia. The tsunami and earthquake that rattled Japan in March 2011 killed one worker and injured more than a dozen others. Honda and other car manufacturers in the country were forced to cease production for about a month before resorting to operating at reduced capacity due to a shortage of parts. Then, in October, its auto parts manufacturing plants in Thailand were damaged by floods. The Thai plant supplied parts to the US and Canada, and Honda had to reduce North America production until the damage in Thailand could be assessed and the plants can be repaired. Production was down more than 30% for the first half of 2012.
Like its rival Toyota, Honda is facing questions about the quality of its cars. The company recalled some 2.5 million vehicles in August 2011 over software in the automatic transmission that could cause the vehicle to stall and make it difficult to put the car into park.
Automotive sales account for more than 75% of Honda's revenues. In its home region of Asia, Honda's automotive focus is the same as everyone else's -- China and India. Unit sales in the region for 2011 grew by 32% and revenue increased more than 20%. To meet the increasing demand, Honda added capacity to one of its Chinese factories and opened new facilities in both India and Thailand. Its Dongfeng Honda Automobile unit, a 50/50 joint venture with Dongfeng Motor, is building a second factory in China to keep up with surging demand. The plant, which is expected to open sometime in 2012, is expected to produce 100,000 units a year by 2012. The car company's 50/50 joint venture with Denway Motors, known as Guangqi Honda Automobile, should produce 480,000 units annually by the end of 2011. Altogether, Honda's total production capacity in China will reach 890,000 vehicles by 2013.
With a desire to concentrate on its own growth strategy in the India market, Honda sold its 26% stake in Hero Honda Motors (renamed Hero MotoCorp Ltd. in mid-2011), a joint venture between Honda and Hero Group, which is run by the Munjal family. Though the exact amount of the 2011 transaction was not reported, Hero indicated earlier in the year that it would buy the shares for approximately $853 million. Hero Group now owns about 52% of Hero MotoCorp.
Honda is enjoying brisk motorcycle sales, particularly in Asia where motorcycles are a popular mode of transportation. Motorcycle sales account for almost 15% of revenues. The company is beefing up production capacity in India to keep up with demand. Honda is adding on to its two existing Indian factories and is building a third one. Indonesia is the world's third-largest market for motorcycles (after China and India). Although high gas prices triggered inflation in Indonesia and the ensuing credit crunch put a damper on sales, demand for motorcycles in the region remains high. To that end, Honda has announced plans to expand its plant and increase motorcycle production in Indonesia to 4 million in 2012. The company is also expanding its plant in Vietnam to produce 2 million bikes. Motorcycle sales in South America (particularly Brazil) are zooming along; however, sales in North America and Europe slowed in 2011. North American motorcycle sales were hurt by rising gas prices and interest rates. Sales of ATVs also declined in North America as economic jitters prompted consumers to postpone purchases of expensive recreational goods.
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