Motorcycles are selling well, while cars are facing a downturn. Honda's Q3 profit increased by 5%, slightly below expectations.

Honda Motor Co., Ltd. Sponsored ADR (HMC.US) said on Thursday that its operating profit for the third quarter increased by 5% year-on-year, mainly due to strong performance in its motorcycle business and a weak yen. However, this number fell short of analysts' expectations. As Japan's second-largest automaker, Honda reported an operating profit of 397.3 billion yen (approximately 2.6 billion dollars) for the three months ending on December 31, slightly below analysts' average expectation of 407 billion yen. Net sales for the third quarter reached 5.5 trillion yen, exceeding market expectations of 5.4 trillion yen. Honda mentioned that its motorcycle business was strong, but its car sales in China and Japan were affected, while demand in the United States remained stable. The company added that its car business benefited from sales growth in the key U.S. market, while sales in China declined in the quarter. With the rapid rise of Chinese electric vehicle manufacturers, Japanese automakers like Honda face increasingly fierce competition in the Chinese market, including price wars. Looking ahead, Honda reiterated its forecast for full-year operating profit of 1.42 trillion yen. Collapse of Honda-Nissan Merger Ahead of this earnings announcement, Honda and its competitor Nissan Motor Co. (NSANY.US) issued a joint statement saying that they had agreed to terminate merger talks, but would continue to collaborate in the electric vehicle field. The failed merger has significant implications for all three companies, especially Nissan. The struggling automaker now has to seek alternative solutions to rescue its fragile financial situation. Honda, on the other hand, at least maintained stability in its full-year profit forecast after meeting expectations for the third quarter. Nissan has lowered its full-year operating profit forecast from 150 billion yen to 120 billion yen, including restructuring costs of 100 billion yen. Honda CEO Toshihiro Mibe said, "While the outcome is regrettable, the consensus on the synergies between both parties can still be utilized in existing strategic collaborations." He also emphasized that Honda never considered a hostile takeover of Nissan, and the Japanese government did not initiate or participate in negotiations with Nissan's top management. Since the news of a possible Honda-Nissan merger emerged, nearly three months have passed. While one side sought to expand scale to address changes in the global automotive industry, the other urgently needed financial assistance. If the merger had succeeded, the Japanese automotive industry would have formed two major camps, with the new alliance competing against Toyota and its numerous small car companies. Globally, this would have helped to more fairly compete against traditional brands like Volkswagen, which also face fierce competition in the Chinese electric and hybrid vehicle market. Nissan garnered attention last November when its net profit in the first half of the year plunged by 94%, and it announced plans to lay off 9,000 employees, reduce production capacity by 20%, and lower its full-year profit forecast by 70%. Frequent changes in top management and an aging product line have made Nissan uncompetitive in the U.S. hybrid market and the Chinese electric vehicle market. Sources revealed that during the merger negotiations, Honda insisted on Nissan restructuring internally first, while Nissan believed it could repair business without closing factories. Earlier this month, reports suggested that Honda had proposed acquiring Nissan and turning it into a wholly-owned subsidiary, but faced strong opposition. Now, Nissan must seek new partners, while Honda looks to the future with a more optimistic outlook. Honda plans to increase its sales of hybrid vehicles to 1.3 million units by 2030, doubling from 650,000 units in 2023 (excluding the Chinese market), with growth expected mainly in the North American market. Due to strong demand in the Asian market, Honda raised its annual motorcycle sales forecast from 20.2 million units to 20.6 million units, but adjusted its car sales forecast from 3.8 million units to 3.75 million units due to poor performance in the Japanese market. Honda Vice President Shinji Aoyama said at the third-quarter earnings briefing, "Strong motorcycle sales were offset by declining car sales and the resulting decrease in profits." He also confirmed that the 1.1 trillion yen stock buyback plan announced in December will proceed as planned.