Honda Is Investing for an Electric Future

Sector Strategist

David Whiston

Honda's products and strong financial position should keep it on solid ground, but the competition is fierce and the U.S. market's increased move to light trucks—where Honda's lineup is not as complete as competitors'—may be permanent. Ongoing risks include foreign-exchange volatility, a highly competitive U.S. market, and rising input costs for Honda and suppliers.

Honda's brand along with its reputation for quality drives demand for its vehicles, but its longtime niche in fuel-efficient cars historically positioned the company well to take advantage of consumers seeking more fuel-efficient vehicles. Over 2003-09, the U.S. car/light-truck mix moved to 55%/45% from 46%/54%, but as gas prices fell and light-truck fuel economy improved, cars have lost share to nearly 20% in 2023. In 2022, cars made up 33% of Honda's U.S. sales mix, compared with 31% for Toyota, 11% for GM, and 3% for Ford. Honda’s car focus gives it an advantage whenever the critical U.S. market has high gas prices, but with cheap oil, we think Honda leaves share on the table in segments such as full-size pickups and large SUVs, as it does not have product in these segments. We’d like to see Honda attain a more complete vehicle lineup. The company instead seems to be focused on efficiency by targeting a two thirds reduction of vehicle trim and option choices across its five global models, such as Civic and Accord, by 2025 versus 2018 levels. As of April 2022, it had achieved a reduction of over 50%.

Despite a strong car and crossover lineup, formidable threats remain, such as rising commodity prices and inflation making input costs expensive while hurting consumers' purchasing power. Honda can mitigate this problem by using more common-size vehicle platforms to reduce costs, but that is not foolproof. Honda does a good job producing where it sells to mitigate exchange risk. In 2020, Honda announced it will buy EV batteries from GM's Ultium battery line, and in April 2021 CEO Toshihiro Mibe said Honda targets a 100% global zero emission (electric and hydrogen fuel cell) vehicle lineup by 2040. Many Honda and Acura all-electric offerings go on sale in 2024-26 across China, Japan, and North America.

Business Strategy & Outlook

Honda does not have a moat, and we do not expect that to change. Vehicle manufacturing is a very capital-intensive business, but barriers to entry are not as high as in the past. The industry is already full of strong competition, so it is nearly impossible for one firm to gain a maintainable advantage. Foreign automakers from China and India may one day enter developed markets such as the U.S., South Korea's Hyundai and Kia has quickly become a formidable competitor, and Tesla is growing rapidly. Furthermore, the auto industry is so cyclical that in bad times even the best automakers cannot avoid large declines in returns on invested capital and profit. Cost-cutting helps ease the pain, but it does not restore all lost profit.

None

Economic Moat

Honda

Acura is the luxury vehicle marque of Japanese automaker Honda. The brand was launched in the United States and Canada in March 1986, marketing luxury, performance, and high-performance vehicles.

Acura

ASIMO is a humanoid robot created by Honda in 2000. It is currently displayed in Miraikan museum in the Japanese capital city of Tokyo.

ASIMO

Honda Motor Co., Ltd. engages in the manufacture and sale of automobiles, motorcycles, and power products. It operates through the following segments: Automobile, Motorcycle, Financial Services, and Power Product and Other Businesses. The Automobile segment manufactures and sells automobiles and related accessories. The Motorcycle segment handles all-terrain vehicles, motorcycle business, and related parts. The Financial Services segment provides financial and insurance services. The Power Product and Other Businesses segment offers power products and relevant parts. The company was founded by Soichiro Honda on September 24, 1948 and is headquartered in Tokyo, Japan.

Earnings data Q1 2024

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Honda Motor's (NYSE:HMC) US division has announced a recall of roughly 4.5 million vehicles globally due to concerns of possible fuel pump failure.  The recall affects 2.54 million vehicles in the US and follows similar recalls of 136,000 US vehicles in 2020 and another 628,000 in 2021 due to the same issue.

Honda recalls 4.5M vehicles over potential fuel pump issue

A fuel pump-related issue has prompted Honda to issue a recall of over 2.5 million vehicles, according to a recall report submitted earlier in the week to the NHTSA.

Honda recalls 2.5 million vehicles due to fuel pump issue

NEW YORK — Honda Motor's American arm is recalling more than 2.5 million vehicles in the U.S. due to a fuel-pump defect that can increase the risks of engine failure or stalling while driving.

Over 2.5 million Honda, Acura cars under recall due to fuel-pump defect

The recall includes 2.54 million vehicles in the United States and comes after the automaker previously recalled 628,000 US vehicles in 2021 and 136,000 in 2020 for the same issue.

Honda recalls 4.5M vehicles worldwide including Accords, Civics over fuel pump issue

Toyota Motor

Honda is recalling some 2.5 million vehicles while Toyota is recalling about a million vehicles to address issues with fuel pumps and air bags, respectively.

Toyota, Honda Car Recalls Top Tesla's

Honda will recall roughly 106,000 CR-V hybrid vehicles over a missing fuse that can short-circuit the battery cable, increasing the risk of fire or injury during a crash, the National Highway Traffic Administration said Wednesday, adding to millions of recalls nationwide over the last month—including two additional Honda recalls.

Honda To Recall More Than 100,000 Hybrid Vehicles Over Risk Of Fire, Injury In A Crash

Honda Motor Co's American unit is recalling about 106,030 CR-V hybrid vehicles due to the risk of fire or injury in a crash caused by an overheated battery cable or short circuit, the National Highway Traffic Safety Administration (NHTSA) said on Wednesday.

Honda to recall over 100000 hybrid vehicles - NHTSA

Honda Motor (HMC) concluded the recent trading session at $30.19, signifying a +1.27% move from its prior day's close.

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In the latest trading session, Honda Motor (HMC) closed at $29.81, marking a +1.26% move from the previous day.

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Volkswagen AG

The United Auto Workers union says foreign automakers Honda, Hyundai and Volkswagen all engaged in unfair labor practices against workers seeking to unionize in U.S. shops.

UAW accuses Honda, Hyundai and Volkswagen of union-busting

The United Automobile Workers (UAW) union filed labor practice charges against Honda Motor Co. (HMC), Hyundai Motor Co., and Volkswagen for suppressing unionization efforts in several U.S. states as the union steps up its efforts to expand membership.

UAW Files Charges Against Honda, Hyundai, and Volkswagen as Its Membership Grows

The United Auto Workers, fresh off negotiating record labor contracts with the Big Three Detroit automakers, filed unfair labor practice charges with the National Labor Relations Board against Honda Motor (NYSE:HMC), Hyundai and Volkswagen Group (XETRA:VOW) on Monday. The UAW alleged that a Honda facility in Indiana; a Hyundai plant in Alabama and a Volkswagen facility in Tennessee have engaged in “union-busting as workers organize to join the UAW,” the union said.

UAW charges Honda, Hyundai and Volkswagen with illegal unionbusting

The United Auto Workers have filed unfair labor charges against Honda, Hyundai, and Volkswagen—three of the largest non-unionized auto manufacturers in the U.S.—less than two weeks after they began a push to organize workers at the non-union shops.

Auto Workers Allege Union-Busting At Honda, Hyundai, And Volkswagen

United Auto Workers just accused three automakers – Volkswagen (ETR: VOW3), Hyundai (KRX: 005380), and Honda Motor (TYO: 7267) of unfair labour practices. Shares of all three still ended in the green on Monday.

UAW strikes again – VW, Honda, and Hyundai are at its radar this time

The United Auto Workers union said Monday it filed unfair labor practice charges against Honda Motor , Hyundai Motor and Volkswagen , citing aggressive anti-union campaigns to deter workers from organizing.

UAW files unfair labor charges against Volkswagen, Honda, Hyundai

The UAW has filed unfair labor practice charges with the National Labor Relations Board against Honda, Hyundai and Volkswagen, the union said Monday.

UAW files unfair labor practice charges against Hyundai, Honda and VW, accusing them of union busting

Honda (HMC) recalls more than 300,000 2023-2024 HR-Vs and Accords due to front seatbelt defect.

Honda (HMC) Recalls 300K Plus Vehicles for Seatbelt Defects

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NEW YORK — Honda is recalling select 2023-2024 Accord and HR-V vehicles due to a missing piece in the front seat belt pretensioners, which could increase injury risks during a crash.

Honda recalls more than 300,000 Accords and HR-Vs over missing piece in seat belts

Nissan Motor Co Ltd

Stellantis N.V. 

Although the usual line remains the same – electric vehicles are the future – several hyped EV stock picks have suffered the curse of the market jinx. With various pressures such consumer demand erosion and a sector-wide price war clouding the burgeoning industry, electric mobility is arguably facing its first true test.

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Honda (HMC) is set to gain from its expanding lineup of electric vehicles, frequent collaborations and cost-containment efforts. However, high R&D expenses remain a headwind.

Here's Why You Should Retain Honda Motor (HMC) Stock Now

For fiscal 2024, Honda (HMC) forecasts an operating profit of 1.2 trillion yen, up from the previous projection of 1 trillion yen and implying growth of 53.7% year over year.

Honda (HMC) Q2 Earnings Top Estimates, FY24 Profit View Raised

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Why a Jump in US Demand for Honda Cars Put Its Earnings in Focus This Week

Honda Motor Co.'s U.S. unit joined other foreign carmakers in raising their automobile workers' wages in the wake of historic wins for the United Auto Workers and as the union has vowed to intensify its organizing push.

News for Honda Stock (HMC)