Honda’s Profits Plunge 37% Amid Tariff Pressures and Chip Shortage

Honda Motor Co has reported a significant decline in profits for the first half of its fiscal year ending September 2023, largely attributed to tariffs imposed by the United States under President Donald Trump. The company’s profit fell by 37 percent, reflecting the challenging economic environment and supply chain disruptions.

For the period from April to September, Honda’s profit stood at 311.8 billion yen (approximately $2 billion), down from 494.6 billion yen (around $3.2 billion) in the same period the previous year. Sales during this timeframe totaled 10.6 trillion yen (about $69 billion), a decrease of 1.5 percent from nearly 10.8 trillion yen (approximately $70.5 billion).

In light of these results, Honda has revised its profit forecast for the fiscal year ending in March 2024 downward to 300 billion yen (around $2 billion). This marks a substantial decline of 64 percent compared to last year’s profit of 835.8 billion yen (approximately $5.4 billion). Initially, the company had projected an annual profit of 420 billion yen (about $2.7 billion).

One of the key factors impacting Honda’s financial performance is the unfavorable currency exchange rates, which have eroded 116 billion yen (approximately $756 million) from its operating profit during the six months. Despite these challenges, Honda achieved record sales in its motorcycle segment, driven primarily by strong demand in Asia, excluding Vietnam. The company reported sales of over nine million motorcycles in Asia, an increase from 8.8 million units sold a year earlier.

While motorcycle sales surged across the globe, Honda’s overall vehicle sales in the first half decreased to 1.68 million vehicles, down from 1.78 million. There was a mixed performance by region: vehicle sales increased in North America but fell in Japan, other parts of Asia, and Europe. Although Honda manufactures many of its vehicles in the United States, the tariffs have significantly impacted its operating profits, leading to a decline of 164 billion yen (approximately $1.1 billion) in the last six months.

In addition to tariff pressures, Honda is grappling with a semiconductor shortage exacerbated by geopolitical tensions. Following the Dutch government’s decision in late September to take control of Nexperia, a semiconductor manufacturer owned by Wingtech Technology, China halted shipments from Nexperia’s facility in Dongguan. Although these exports have resumed, the initial disruption has already affected production.

As a result, Honda’s plant in Celaya, Mexico, has halted operations since October 28, 2023, and adjustments have been made to production schedules at North American facilities starting from October 27. The company has not disclosed when it expects production to return to normal levels, leaving uncertainty for its operations moving forward.

The combination of tariffs, fluctuating currency rates, and supply chain disruptions paints a challenging picture for Honda as it navigates through a complex global automotive landscape.