Top Automotive Blogs

Honda cars witness a dip of 60 percent in net profit, geared up for the recovery

Japan based automobile manufacturer Honda Motors has witnessed a major drop in its profit during recently concluded financial year 2011-12. The decline in profit percentage was pretty obvious as the premium carmaker was in a distress of a lifetime. There were various grounds for this debacle, starting from earthquake on the eastern coast of Japan followed by Tsunami and extensive floods in Thailand along with the depriving sales figures in plunging economic condition in Europe. These three concerns had let the company suffer a dip of 60.4 percent in the net profits for the fiscal that marked its end in March 2012.

At the time of these natural calamities the production in Japan and Thailand was on hold, which was the prime reason for the dunk, and at the same time the situations worsened when Japanese currency saw depreciation which largely affected the exports of the company. The reduction in the value of Yen in the global market made exports pricier and mainly resulted in cut down of profit margin of Honda.

Here, Honda produces components from its Thailand based spare parts manufacturing a unit that supplies the same to majority of the Asian auto market, including India. Honda Motors India was also forced to halt its production in the country due to unavailability of vital components from Thailand. This resulted in hitting the sales of its best selling models like Honda City sedan, Honda Jazz hatchback and Honda Brio small car. The delayed launch of 2012 Honda City model alongside the abrupt closure of booking orders for Honda Brio was a result of the same crisis.

Honda Group net profits for FY 2012 stood at ¥211.5 billion ($2.63 billion) as compared to ¥534.1 billion ($6.67 billion) which were recorded during FY 2011. Revenue from sales during the fiscal too were down 11.1% and stood at ¥ 7.95 trillion ($99.2 billion) while operating profits plunge d to ¥231.4 billion (2.88 billion) down 59.4% as compared to the previous fiscal figures.

Japan’s third largest automaker net profits for the 2011-12 was recorded at $2.63 billion against $6.67 billion that was scaled in financial year 2010-11. The returns from the sales war also comparatively low at 11.1 percent ($99.2 billion). Moreover the operating profits fall to $2.88 billion, this down was 59.4 percent in comparison to last year’s figures.

As per the company, which back to normalcy, it will soon make up the inescapable loss with its ramp up in the production. In India, the New Honda City is getting some superb sales number from last couple of months that has resulted in the resentment of rivals like Nissan Sunny, Skoda Rapid and Hyundai Verna. On the other hand, the recently opened second phase of bookings for cute looking small car Honda Brio has taken the market by storm leaving its competitors such as Maruti Swift, Ford Figo, Hyundai i10 and Maruti Ritz way behind.