Motor Industry Suffers Heavy Losses Amidst Surprising Honda Profit

Strategic Insights -

The motor industry has seen a grim first-half performance, with many manufacturers posting heavy losses. However, Honda has bucked the trend, reporting a surprising first-quarter net profit and raising its full-year forecasts. The company cites cost reductions as the reason behind its success, rather than increased sales. Peugeot Citroen and Nissan, on the other hand, blame the slump in sales for their heavy losses, with Peugeot predicting a recovery unlikely before the end of next year.

Key Takeaways:

  • Honda reported a first-quarter net profit, attributing it to cost reductions rather than increased sales.
  • Peugeot Citroen and Nissan suffered heavy losses, with Peugeot predicting a recovery unlikely before the end of next year.
  • The collapse in demand saw Peugeot vehicle sales slump 20% and the group lose €826 million at operating level in the first half.
  • Honda expects operating profits of ¥70 billion and a net surplus of ¥55 billion for the full year, an improvement on previous forecasts.
  • Nissan reported a net loss of ¥16.5 billion in the three months to end of March, against a profit of ¥52.8 billion a year ago.
  • The motor industry as a whole expects a modest boost to production due to "new for old" incentives linked to scrappage schemes.
  • Peugeot's new chief executive, Philippe Vain, said cost cutting and new model launches have had little impact on performance, but the balance sheet has benefited from a loan of €3 billion and €400 million from the European Investment Bank.
  • Honda expects to improve sales in Japan and China, but anticipates further setbacks in Europe and the United States.

Statistics:

  • Peugeot vehicle sales slumped 20% in the first half.
  • The group lost €826 million at operating level in the first half, compared to a profit of €1.11 billion in the same period a year ago.
  • Honda's net profits tumbled to ¥7.6 billion in the three months ending June, compared to ¥173.4 billion a year ago.
  • Nissan reported a net loss of ¥16.5 billion in the three months to end of March, against a profit of ¥52.8 billion a year ago.
  • Honda expects operating profits of ¥70 billion and a net surplus of ¥55 billion for the full year.
  • Nissan total vehicle sales dropped almost 23% to 723,000 in the quarter.
  • Peugeot's total unsold vehicles fell 31% to 431,000, benefiting working capital.

Sources:

  • Financial Times
  • The Economist
  • Bloomberg News
  • BBC News