Honda Posts Dismal Q4 Results as Hyundai’s Market Share Increases

Japanese auto manufactures have incurred heavy losses ever since the Japanese coast was struck by an earthquake and subsequent tsunami on March 11. As most of the manufacturers had to decrease production or shut down their facilities. The automobile industry was just recovering from the downturn in economic conditions when they were hit by the destructive tsunami.

Now auto manufacturers do not expect things to return to normal till 2011 end. Honda recently reported a fall of 52% in their quarterly profits because of the decrease in production owing to shortage of auto parts, with the sales decreasing by 2.9%. The operating profits of the first quarter for Honda were $562mn. Meanwhile, other manufacturers like the South Korean Hyundai Motors have benefited as its competitors lost.

The net profits for Hyundai in the Q1 results increased by 47%. Expert analysts suggested that improved product line up, low inventory and high sales of their new models were responsible behind the company’s impressive margins. The Chief Financial Officer for Hyundai, Lee Won-hee, said that Hyundai sought competitiveness and quality in posting great results in spite of the uncertainties which stemmed from the Japanese crisis and high prices of oil.

An analyst, Tae-bong at IBK Securities said that Japanese auto manufactures are most likely to see a decrease of 15 to 30% in their production output this year, which will lead to other competitors like Hyundai gaining higher market share by producing more vehicles by working overtime this year.

In the year 2010, Hyundai had a domestic market share of 45% on global sales figures of 3.61mn units. The auto manufacturer plans to sell 3.9mn vehicles worldwide this year, while aiming for a 47% domestic market share. Japanese auto manufacturers are refraining from projecting annual forecasts as they are struggling to get enough parts needed for increasing their production, which is only 50% of the planned output.

The first quarter results were quite disappointing for Honda. A senior director and managing officer at Honda, Fumihiko Ike, said during a press conference that they foresee the Q2 to be bleaker in comparison to this quarter because even though they witness a rise in production levels, they will still experience a delayed effect at their overseas factories.

In another grim piece of news, he also added that Honda would begin laying off their contract workers at their underutilized factories so as to curtail losses.