Honda announced plans on Friday to increase its research and development (R&D) spending by nearly a quarter in the current financial year, aiming to enhance its competitive edge in hybrid and other electrified vehicles. The move comes as the company forecasts a 2.8% rise in operating profit for 2024/25.
As Japan’s second-largest automaker by volume, Honda revealed a share buyback program worth up to 300 billion yen ($1.93 billion) following its fourth-quarter earnings report, which exceeded analysts’ expectations. The company attributed this success to strong sales growth in the United States, offsetting a decline in China.
A weaker Japanese yen and robust sales of hybrid models also contributed to Honda’s profit growth. The company anticipates full-year operating profit to increase to 1.42 trillion yen, surpassing the average profit estimate of 1.39 trillion yen from a poll of 22 analysts by LSEG.
Despite being a newcomer to fully electric vehicles, Honda plans to invest 1.19 trillion yen in R&D this year, marking a 23% increase from the previous year. CEO Toshihiro Mibe stated, “Our current plan is to create an environment that allows us to produce 2 million hybrid models in a year by 2030, and we have been planning our business strategy taking into account necessary investment.”
In the first quarter ending March 31, Honda’s operating profit surged more than six-fold from a year earlier to 305.6 billion yen, surpassing analysts’ expectations of 248.3 billion yen. This growth reflects a broader industry trend, as automakers increasingly focus on hybrid vehicles amid disappointing sales of fully electric vehicles.
Mibe also mentioned progress in talks with Nissan Motor regarding a potential partnership to collaborate on producing electric vehicle components, expressing hope to provide an update on the discussions soon.
Despite a 17% sales increase in its largest overseas market, the U.S., with approximately 378,000 vehicles sold in the January-March period, Honda faced a more than 6% decline in sales in China, with around 207,000 vehicles sold. The company, along with other Japanese brands, has faced challenges in China against local rivals offering low-cost, technology-rich electric vehicles.
Last month, Honda announced plans to establish an electric vehicle production base in Ontario, Canada, and launch six electric vehicle models branded as “Ye” in China by 2027.
