Honda Lays Out Aggressive Growth Plans

by Trefis Team
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Honda Motors (NYSE:HMC) laid out its mid-term plan with the aim to double its vehicle sales to 6 million units in the next five years. Honda is betting on emerging markets such as China and India for a large part of the incremental sales. The automaker sold 3.1 million vehicles globally in the fiscal ending March 2012. However, vehicle sales were impacted negatively last fiscal as Honda was hurt badly by natural disasters. The company has rebounded strongly this year with global automobile sales up 75% at 999,000 units in the quarter ending June 30. [1]

See full analysis for Honda Motors

Honda also plans to sell 3 million vehicles in Japan, the United States, Europe and other developed markets combined, up 50% from the current levels. Recently, Honda launched its ninth generation Accord with the aim of dislodging Camry as the highest selling car in the U.S. The company is also increasing its North American production to address concerns of a strong Yen. In Japan, it plans to strengthen its mini-car lineup by launching six new models by 2015. [1] Also part of its mid-term strategy includes rolling out a fuel cell vehicle in Japan, the U.S. and Europe by 2015, maintaining production of 1 million vehicles in its home country, and offering more hybrids, including a new plug-in in the U.S. next year.

Fit-ting into Developing Markets

In emerging economies, Honda plans to boost sales by strengthening its portfolio of cheaper cars. The newer version of Fit (also known as Jazz in some countries) will be launched next year. An SUV under the Fit range of cars will be rolled out as well. In India, the automaker plans to accelerate the vehicle sales by introducing its first diesel car in the country by 2014. Honda is investing $600 million to commence the production of a diesel-powered entry-level sedan.

Honda’s Indian sales are seeing a slowdown due to a lack of diesel cars in its portfolio. With soaring gas prices, Indian customers are showing a predilection for diesel cars. Gasoline prices are deregulated while diesel is heavily subsidized in the country, thereby lowering the running cost of the vehicle. [2]

We have a price estimate of $41 for Honda Motors, which is around 20% above the current market price.

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Notes:
  1. Honda pledges to double global sales in five years, September 23, 2012, usatoday.com [] []
  2. Honda to launch diesel vehicle to head off stormy petrol, September 24, 2012, business-standard.com []
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