Honda forecasts 2.8% rise in operating profit for 2024/25

Honda Motor Co Ltd has announced a significant boost in its research and development (R&D) spending for the fiscal year, aiming to enhance its competitiveness in hybrid and other electrified vehicles. The company plans to increase its R&D budget by nearly a quarter, reflecting its commitment to advancing electric vehicles (EVs).

Honda’s decision comes as part of its strategy to strengthen its position in the market, especially in the face of growing competition from other automakers. The company expects a 2.8% rise in operating profit for the 2024/25 fiscal year, signalling confidence in its future growth.

The Japanese automaker also revealed plans for a share buyback worth up to 300 billion yen ($1.93 billion), following better-than-expected fourth-quarter earnings. This positive performance was largely driven by strong sales growth in the United States, which offset a decline in China. Additionally, favourable currency exchange rates and robust sales of hybrid models contributed to Honda’s profitability.

Despite being a latecomer to the market for fully electric vehicles, Honda is determined to make significant strides in this area. The company aims to create an environment capable of producing 2 million hybrid models annually by 2030, aligning its business strategy with this ambitious goal.

Honda’s CEO, Toshihiro Mibe, addressing journalists, emphasised the importance of investment in achieving their targets. He stated, “Our current plan is to create an environment that allows us to produce 2 million hybrid models in a year by 2030, and we have been planning our business strategy taking into account necessary investment.”

In the first quarter of 2024, Honda’s operating profit surged more than six-fold from the previous year to 305.6 billion yen, surpassing analysts’ expectations. This strong performance underscores the company’s resilience and ability to adapt to changing market dynamics.

The automotive industry is witnessing a shift towards hybrid vehicles, as fully electric vehicles have faced challenges in terms of sales. Honda’s approach reflects this trend, as it focuses on hybrid vehicle production to meet consumer demand.

Honda is also exploring potential partnerships to accelerate its EV efforts. The company is in talks with Nissan Motor over a possible collaboration on producing EV components. Mibe expressed optimism about the progress of these discussions, indicating a potential update for the market in future.

Read more on Honda partners Nissan to compete against Tesla, BYD, other EV rivals