Honda Cars in 2023: US Demand Surge Boosts Earnings and Market Share with Prices on the Rise

Despite fewer incentives and rising auto loan defaults, American buyers remain passionate about Honda vehicles.

This feature highlights Honda's latest earnings performance, revealing insights into consumer trends and economic conditions shaping the automotive sector.

Key Highlights

• Honda Motor Company (HMC) exceeded earnings forecasts for Q2 fiscal 2023, driven by robust US auto sales.
• US sales, including Acura models, soared to over 339,000 units in Q2, marking a 53% increase year-over-year.
• Honda's US market share climbed by 2 percentage points to 8.5%, with North America accounting for 40% of global sales.
• Consumers continue vehicle purchases despite rising interest rates and inflation pressures.
• Honda views increased auto loan delinquencies as a return to pre-pandemic norms, not a cause for alarm.

In the second quarter ending September 2023, Honda posted a net profit of 270.98 billion yen ($1.79 billion), surpassing analyst estimates of 246.46 billion yen ($1.63 billion). Revenue reached nearly 5 trillion yen ($330 billion), up from 4.25 trillion yen ($280 billion) in the same period last year.

Strong US performance offset challenges in the Chinese market, where competition in new energy vehicles intensifies. Honda's US sales, including premium Acura, climbed 53%, outpacing the industry’s 16% average growth, according to Cox Automotive data.

Honda’s US market share improved to 8.5%, still below pre-pandemic levels, with North America representing 40% of total vehicle sales. The company raised its full-year 2024 operating profit forecast to 1.2 trillion yen ($7.9 billion) from 1 trillion yen ($6.6 billion), and worldwide unit sales are now projected at 2.92 million, up from 2.88 million units.

Honda shares have gained approximately 38% year-to-date, reflecting investor confidence.

Strong US Auto Sales Propel Foreign Brands

Despite economic headwinds such as rising auto loan interest rates and elevated vehicle prices, US consumers continue purchasing vehicles at a robust pace, with annualized sales exceeding 16 million units in Q3, up from 14 million the previous year.

Foreign manufacturers like Honda and Toyota have capitalized on improved inventory levels and easing semiconductor shortages that previously constrained production during the pandemic.

According to the Bureau of Economic Analysis, imports of newly manufactured autos reached $56.1 billion in Q3, a 7% increase year-over-year. Approximately 75% of Honda's global vehicles are produced outside the US as of September 2023.

Cox Automotive reports Honda increased US customer incentives by 86% quarter-over-quarter to an average of $1,666 per vehicle, still below the industry average of $2,368.

Rising Auto Loan Delinquencies: A Normalizing Trend

Honda executives acknowledge a rise in US auto loan delinquencies, with serious delinquencies (90+ days overdue) reaching 2.5% in Q3, higher than pre-pandemic levels, per the New York Fed's Credit Access Survey. Total auto loan debt hit a record $1.6 trillion, up $13 billion.

This increase stems from Federal Reserve interest rate hikes, which have elevated borrowing costs across mortgages, credit cards, and auto loans. Persistent delinquency growth could pressure future vehicle sales.

However, Honda CFO Eiji Fujimura emphasized that these delinquency rates reflect a return to normal pre-pandemic conditions and do not currently pose significant concern.

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