Honda Forecasts 68% Slump In Annual Profit Due To Pandemic

The hit to the global economy and a consequent forecast of a significant hit to global demand in cars because of the novel coronavirus pandemic has forced Japanese auto giant Honda Motor Co to forecast a 10-year low annual operating profit for the current year with a 68 per cent decrease.

In the year to end-March 2021, the company expected that its profits will reduce to about 200 billion yen ($1.89 billion) which will be the weakest for the third largest auto maker of Japan since the 2010/11 year and will be much lower than expectations of analysts.

Following a 40 per cent slide in vehicle sales in the month of June, which resulted in a 113.7 billion yen operating loss, Honda is now expecting a 6 per cent drop in its annual vehicle sales for its current financial year.

The novel coronavirus pandemic has hit the global auto industry with companies being forced to shut down factories and production while also preventing consumers from going to car dealerships.

Compared to a total sale of 4.79 million vehicles last year, the owner of the CR-V SUV crossover and the Fit compact hatchback anticipates selling of about 4.5 million vehicles this year. The Japanese firm expects a 16 per cent drop in sale in its North American business which is a crucial market for the company – primarily because of the disability of the United States to bring the pandemic under control with a fresh surge in infections.

“If the current situation continues as is, we think the situation will not get worse (than we saw earlier this year), but it will take time for demand to recover to pre-pandemic levels,” Honda’s Executive Vice President Seiji Kuraishi told a livestreamed briefing.

Honda however expects a 8 per cent growth in annual sales in Asia which will partially offset the slump in sales in North America.

One of the rare bright spots for many global automakers has been China, which is also one of the largest markets for Honda. The Chinese market is witnessing a much faster revival of demand for cars compared to other countries.

This will be the second straight quarter of loss for Honda as it reported its worst operating loss since the March 2009 quarter.

But despite the bleak forecast made by it for the short term, Honda has done better than most of its Japanese rivals including Nissan Motor Co, Mitsubishi Motor Corp and Mazda Motor Corp, all of which forecast record operating losses for the year last week.

(Adapted from EconomicTimes.com)

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