VALUATION HIGHLIGHTS
- Vehicle Leases & Loans constitute 18% of the Trefis price estimate for Honda's stock.
- Automobiles constitute 11% of the Trefis price estimate for Honda's stock.
- Motorcycles constitute 6% of the Trefis price estimate for Honda's stock.
WHAT HAS CHANGED?
Latest Earnings - Q3 FY'26
For the first half of the financial year, Honda's automobile business posted an operating loss, due in large part to 224 billion yen (about $1.44 billion) worth of one-time expenses related to electric vehicles. The company also slashed its full-year profit forecast by 21% due to these one-time expenses and worsening sales in China and other Asian markets.
Note: Honda's FY'25 ended on March 31, 2025 Q2 FY'26 ended on September 30.
POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE
-
Honda's Automobile Units Sold: Honda's auto sales have declined from almost 4.8 million units in FY'20 to just about 3.7 million in FY'23, although it recovered to 4.1 million in FY'24. The metric stood at 3.7 million units in FY'25. Trefis expects the metric to gradually rise to around 4 million units by FY'32. However, if volumes remain roughly flat, our price estimate could see a 5% downside.
BUSINESS SUMMARY
Honda is one of the world's ten largest automakers and the largest motorcycle producer. In addition to producing Honda-branded vehicles (cars, vans, SUVs, trucks) and motorcycles, the company is also a leading producer of powersport vehicles (ATVs, watercraft) as well as other motor-based products (generators, pumps). Honda also provides financing through leases and loans for its products. Honda's financing business is a significant contributor to the company's profits. Honda is headquartered in Tokyo, Japan.
SOURCES OF VALUE
High gross margins for automobile business
According to our estimates, Honda's gross margin for its vehicle business is close to 20%, ahead of many of its peers.
KEY TRENDS
- Focus On Electric Vehicles
Honda Motors is taking concrete steps to build strong electric vehicle capabilities. The company has been investing in EV development for the last few years. For instance, it signed a collaboration agreement with General Motors to develop affordable electric vehicles based on a new global platform. The first vehicles will likely roll out in 2027, with prices likely to start below $30,000.
