Boosted by strong demand for hybrids, Honda hits record high profit for FY2024

Despite troubles in China, Honda has set a record high operating profit of 1.38 trillion Yen (~RM 42 billion) for the financial year period of April 2023 to March 2024 (FY2024). The figure is 77% higher than the previous financial year.

Honda credits the stellar results to its well-balanced portfolio that includes the highly profitable motorcycle business (with a 17.3% profit margin), which contributed 40 percent of the company’s total profit, nearly equal to that of Honda’s automobiles division’s 41% (profit margin of 4.1%)). The rest of the company’s profit is contributed by its power products and other small divisions (such as marine engines, lawn mowers etc.).

Overall, Honda’s profit margin came in at 6.8%, which is significantly higher than FY2023’s margin of 4.6%.

For its core automobiles business, Honda says the increased desirability of models like the Civic, CR-V, and Accord, which now share even more parts than before and are offered in hybrid powertrains – which are in strong demand, especially in the USA, is improving the company’s earnings.

“With respect to our hybrid system, in the second half of the 2020’s, we plan to achieve an even higher level of advanced performance as well as cost improvement,” said President and CEO Toshihiro Mibe.

Breaking down the sales results by region, Honda saw its sales in China declined by 1.5% to 1.22 million units, due to intense competition from Chinese brands, especially Chinese electric cars.

Sales in Asian region declined 5.3%, more than half of it attributed to China. The decline in China was compensated with much higher increase in sales in USA (up 35.5%, to 1.34 million units) and Japan (up 8.2%, to 595,000 units). Sales in Europe were up 22.6% to 103,000 units.

In total, Honda sold 2.856 million cars in FY2024, up 19.8% from the previous financial year.

For FY2025, Honda is forecasting a sales target of 2.970 million cars, 3.9 percent higher than FY2024.

Crucially, spending in R&D will be increased by 23.3% to 1.19 trillion Yen (~RM 36.2 billion).

Honda's record high profit comes after a similar achievement by Toyota, but unlike Honda, is setting the bar lower for FY2025, with a sales target that's just 0.9% higher than FY2024. The move is part of the company's intentional slowdown as it looks inwards to invest in its human capital.