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Honda Motor Co Ltd Earnings - Analysis & Highlights for Q3 2025
Overview
PositivesNegativesOutlook
- Operating profit increased by ¥63.5 billion YoY to ¥1,139.9 billion.
- The company is successfully electrifying motorcycles based on the past technologies of the engines and frames and is working on similarly with the battery EVs.
- The company is able to maintain a high level of profitability for the motorcycle businesses.
- Hybrid and gasoline based engine cars have a profitability that is far improved from the previous situation.
- Profit for the period attributable to owners of the parent company was ¥805.2 billion, down ¥64.3 billion.
- Profit before income taxes were down by ¥38.9 billion due to the profit of equity method, which declined due to a drop of the unit sales in China and so on.
- The company experienced a negative impact of $20 billion plus on its business due to the 25% tariff.
- The total sales dropped YoY due to the severe market environment in China.
- Automobile operations are revised downward to 3.75 million units due to a decline in Japan.
- Profit before impact taxes before income taxes is expected to be higher by ¥30 billion, reflecting yen depreciation causing forex gains.
- Expenses will increase by ¥73.5 billion, squeezing the profit and R&D cost will increase by ¥125 billion, squeezing the profit too and the currency effects will impact negatively on profit by ¥100.5 billion.
- The NEV ratio is increasing and therefore, if there's a 10% increase, non NEV vehicles will decline the market the gasoline vehicle market will decline by more than 10%.
- The company maintains its previous forecast for both operating profit at ¥1,420 billion and current profit attributable to owner of the parent company ¥950 billion.
Q&A Highlights from Honda Motor Co Ltd Earnings Call Q3 2025
- Analyst asked about the increase in incentives in North America and the impact on the company's profitability.
- The company has seen a slight increase in incentives in North America, but the procurement cost has also increased. The company's SG&A and R&D costs are higher in the fourth quarter, which is the end of the fiscal year, and these costs are not reflected in the company's overall profitability.
- The company has seen a slight increase in incentives in North America, but the procurement cost has also increased. The company's SG&A and R&D costs are higher in the fourth quarter, which is the end of the fiscal year, and these costs are not reflected in the company's overall profitability.
- Analyst asked about the company's measures to improve the profitability of its automobile businesses.
- The company is focusing on improving the profitability of its hybrid and gasoline-based engine cars, which have a profitability of around 80%. The company is also preparing for the next-generation hybrid cars, which are expected to have a higher profitability and commercial value.
- The company is focusing on improving the profitability of its hybrid and gasoline-based engine cars, which have a profitability of around 80%. The company is also preparing for the next-generation hybrid cars, which are expected to have a higher profitability and commercial value.
- Analyst asked about the impact of a 25% tariff on US imports from Mexico and Canada.
- The company has a production mix of around 60% in the US, with the remainder produced in Mexico and Canada. The company is considering short-term actions to reorganize the product mix of its production in Mexico and Canada, but it is also preparing for mid- and long-term measures to address the tariff impact. The company's estimate of the tariff impact is around $20 billion, but it is difficult to visualize the exact impact.
- The company has a production mix of around 60% in the US, with the remainder produced in Mexico and Canada. The company is considering short-term actions to reorganize the product mix of its production in Mexico and Canada, but it is also preparing for mid- and long-term measures to address the tariff impact. The company's estimate of the tariff impact is around $20 billion, but it is difficult to visualize the exact impact.
- Analyst asked about the impact of market conditions on Honda's automobile business and the company's plans for share repurchasing.
- Shinji Aoyama explained that the company's automobile business is affected by market conditions, but did not provide specific details. He also stated that the company is prioritizing EV development and SG&A cost reduction, which may impact automobile profitability.
- Shinji Aoyama explained that the company's automobile business is affected by market conditions, but did not provide specific details. He also stated that the company is prioritizing EV development and SG&A cost reduction, which may impact automobile profitability.
- Analyst asked about Honda's plans for the operating profit of its motorcycle and automobile businesses, specifically regarding the development of battery EVs and the impact of SG&A cost on profitability.
- Shinji Aoyama explained that Honda is investing in the electrification of motorcycles, but the amount of investment is not as significant as it is for battery EVs in automobiles. He also mentioned that the company has growth potential in India, Brazil, and other markets, and that it will maintain a high level of profitability for its ICE engine-based vehicles. For battery EVs, the company is working on combining existing technologies to reduce development costs, but the visibility into the future of the market is unclear due to the North America policy situation.
- Shinji Aoyama explained that Honda is investing in the electrification of motorcycles, but the amount of investment is not as significant as it is for battery EVs in automobiles. He also mentioned that the company has growth potential in India, Brazil, and other markets, and that it will maintain a high level of profitability for its ICE engine-based vehicles. For battery EVs, the company is working on combining existing technologies to reduce development costs, but the visibility into the future of the market is unclear due to the North America policy situation.
- Analyst asked about the impact of the Trump administration's policies on the company's BEV sales and hybrid demand in the United States.
- The company is staying flexible and agile in reacting to the situation, but the current interest point is around the tariff situation with Canada and Mexico. The company is assessing the upcoming situations and may take different actions depending on the situation. The company expects to sell more battery EVs in the future, but it may be difficult to achieve the ZEV requirements due to the current situation. The company is also focusing on selling more hybrid cars in North America, with a target of 500,000 units next year.
- The company is staying flexible and agile in reacting to the situation, but the current interest point is around the tariff situation with Canada and Mexico. The company is assessing the upcoming situations and may take different actions depending on the situation. The company expects to sell more battery EVs in the future, but it may be difficult to achieve the ZEV requirements due to the current situation. The company is also focusing on selling more hybrid cars in North America, with a target of 500,000 units next year.
- Analyst asked about the company's assessment of the current EV and hybrid sales situation, specifically regarding the affordability of hybrid cars and the company's prospects for hybrid sales in North America and Southeast Asia.
- The company expects to sell 400,000 hybrid cars in the current fiscal year and 500,000 units in North America next year. The company is also focusing on selling more hybrid cars in Southeast Asia, specifically in Thailand and Indonesia, where the demand for hybrid cars is growing. The company is a little behind in Indonesia, but plans to be more aggressive in launching and selling hybrid cars in the country next year.
- The company expects to sell 400,000 hybrid cars in the current fiscal year and 500,000 units in North America next year. The company is also focusing on selling more hybrid cars in Southeast Asia, specifically in Thailand and Indonesia, where the demand for hybrid cars is growing. The company is a little behind in Indonesia, but plans to be more aggressive in launching and selling hybrid cars in the country next year.
- Analyst asked about the hybrid ratio for the next fiscal year, given that it is currently 25% for this fiscal year.
- Shinji Aoyama, Chief Financial Officer of Honda Motor Co., Ltd., stated that the hybrid ratio is expected to increase to 35% next fiscal year, with an increase of 100,000 in North America. However, he also noted that the ZEV EV regulation might become more realistic, and the company is unsure of the specifics at this time.
- Shinji Aoyama, Chief Financial Officer of Honda Motor Co., Ltd., stated that the hybrid ratio is expected to increase to 35% next fiscal year, with an increase of 100,000 in North America. However, he also noted that the ZEV EV regulation might become more realistic, and the company is unsure of the specifics at this time.
