What Are The Major Sources Of Revenue For Honda Motor Company?

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Honda Motor Company (NYSE: HMC) is one of the largest automakers and motorcycle producers based on sales.  The company produces branded vehicles (cars, vans, SUVs, trucks) and motorcycles and is a leading producer of Powersport vehicles (ATVs, watercrafts) as well as other motor-based products. It also provides financing in the form of leases and loans for its products. The company’s financing segment is a significant contributor to its profits. In this note, we will discuss the major revenue sources for Honda. According to our estimates, we expect $147.3 billion in revenues for HMC in 2019.

We have a $31 per share price estimate for the company, which is in line with its current market price. View our interactive dashboard – Honda’s Revenue Breakup – and modify the key drivers to come up with your own revenue estimate for 2019.

  • Automotive (~71%) – Honda derives a majority of its revenue from the sales of its automotive units around the world. Per Bloomberg intelligence, 75% of the vehicles Honda sells in the US market are manufactured in the country itself. The Japanese automaker lowered its revenue forecast for FY’19 as it cut its sales forecast by 75,000 cars for North America, citing a flood at a plant in Mexico. North American sales are now expected to be 1.84 million units, as opposed to 2.015 million units estimated earlier. Additionally, the company does not expect a significant revenue impact from recently imposed tariffs in the US as it manufactures a notable quantity of its US volumes in the domestic market itself.  We expect automotive sales of 5.35 million worldwide, translating into $ 104.7 billion in revenues from this division.
  • Motorcycle (~14%) – Honda derives $18.4 billion in revenues from the sales of its motorcycle units. This segment includes motorcycles, all-terrain vehicles (ATVs) and Personal watercraft (PWC). We expect higher sales volume of its motorcycle business to drive its top-line growth in 2019. The increased volume sales are expected in its key markets of Asia, including Indonesia, India, and Vietnam. Honda’s Activa and X-blade models continue to be the bestsellers in these markets in 1Q’19. We expect 21.51 million motorcycle units to be sold by Honda in 2019, as compared to 19.55 million motorcycle units sold in 2018, with an average price per motorcycle of $949 in 2019, converting into $20.4 billion revenues from this segment.
  • Financial Services (13%) – Honda provides a variety of financial services – retail lending, leasing to customers and wholesale financing to its customers and dealers through its finance subsidiaries. Within the financial services segment, North America contributes about 90% of the segment’s revenue. We expect the segment to generate $19 billion in revenue in 2019.
  • Power and Other business (~2%) – HMC manufactures and markets a complete range of power equipment products for commercial, rental, and residential applications. Its comprehensive product line, which includes tillers, portable generators, outboard engines, water pumps, lawn mowers, snow throwers, general purpose engines, electric four-wheel scooters, is powered exclusively by advanced 4-stroke engines. These products are sold by the company in its markets, mainly in Japan, and are also sold to Original Equipment Manufacturers (OEM). Additionally, Honda has a wholly-owned subsidiary of solar-cell business – Honda Soltec Co. Ltd. According to our estimates, we expect 6.3 million power products to be sold by Honda in 2019, rendering $3.2 billion in revenues in 2019.

 

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