|Firm Identify||Honda Motors.|
|Founder||Soichiro Honda, Takeo Fujishawa.|
|Revenue (2019)||¥15,888.6 Billion.|
|Internet Revenue||¥610.three Billion.|
|Variety of Staff||219,722|
|Largest Market||United States.|
Honda is likely one of the main vehicle manufacturers with a worldwide footprint. It’s headquartered in Japan and sells its products worldwide. The firm has released a number of wonderful fashions of automobiles and bikes, in style in each western and asian nations. In recent times, the company is enjoying continuous progress in income driven by larger sales. The business of Honda is split into 4 segments. Vehicle phase is the most important of them. The company can also be investing aggressively in analysis and improvement to grow its market share in the international vehicle market.
North America and primarily U.S. is the most important geographical business phase of Honda. The company also has a robust presence in its home market. The car business is undergoing a serious transformation and the evolution of applied sciences like AI and autonomous driving has brought a number of new alternatives for the auto companies. Honda also has numerous manufacturing and meeting amenities worldwide. Within the U.S. alone, the company has seven amenities. In 2019, the car business has entered a difficult part. Even within the main markets, gross sales have started fallen in the course of the first half of the yr. Main vehicle manufacturers have shaped partnerships to seek out quicker progress and reply to altering market dynamics. Honda has maintained a robust position within the motorbike business in Asia. Nevertheless, when it comes to automotive gross sales, its place in Asia and China is weaker in comparison with the leading rivals. There are different challenges too earlier than Honda, as the companies construction has usually stopped it from shifting nimbly. Numerous recollects have additionally haunted Honda during the last a number of years. To emerge from these challenges, the company has to take a more flexible strategy and focus solely on research and innovation.
Read extra about Honda – its strengths, weaknesses, opportunities and threats in a SWOT analysis for 2019.
Honda Mild Jet. Img src=Honda press launch.
Brand fairness :
As an vehicle business, Honda has managed a robust picture. The corporate’s focus upon know-how, buyer experience and product innovation has led to robust brand fairness. Aside from that, Honda enjoys high model consciousness in North America in addition to Asian and European markets. Robust brand awareness has additionally resulted in larger market share for the brand. Among the many a number of elements driving model equity, Honda’s advertising technique has additionally played a key position in helping the corporate purchase a robust competitive benefit in the vehicle business. Honda makes use of several advertising channels including its distribution network, digital channels and other strategies of promotions like auto-shows for promoting its model and merchandise. Focus upon innovation has also brought superior results for Honda as it’s among the many most trusted brands in U.S., one of the world’s leading car markets.
Honda’s international community of distributors and sellers has helped it keep robust presence in key markets around the globe. The company can also be investing in buyer engagement and superior buyer experience. This stuff also drive shopper confidence in the model and its products. The auto business has entered a difficult part and focusing upon passenger safety and customer expertise will even deliver superior results.
Robust presence in U.S. market :
Honda is among the leading automotive brands in U.S. where its focus upon mobility, robotics and AI have helped it achieve greater market share. Its products including the posh brand Acura have continued to grow in demand. Honda has established seven manufacturing and assembly crops in the USA. The places of those crops embrace Alabama, Ohio, Georgia, North Carolina, South Carolina and India. Ohio has 2 Honda crops. Based on sources, Honda’s market share within the U.S. was 9.1% in 2018. The company generated ¥7,480.4 billion in 2019 in internet income from the United states of america.
Honda can also be the primary Japanese automaker to start production in the USA. It started local vehicle production in america in 1986 with the Honda Accord mannequin. Later, Honda expanded its production to include mild truck fashions. It launched the Acura model in 1986 and established an unique community in the USA. Furthermore, U.S. is the only largest marketplace for Honda merchandise that accounted for greater than 45% of sales income of the brand in the fiscal yr 2019.
Giant product portfolio :
Honda has a large product portfolio that features automobiles, motorcycles, aircrafts and aircraft engines as well as motor elements. The company sells a wide range of cars that embrace passenger automobiles, mild vans and mini automobiles. The passenger automobiles by Honda embrace Accord, City, Civic, Crider, Match/Jazz. Its mild truck models embrace CR-V, Freed, Odyssey, Pilot, Vezel/HR-V, XR-V. N-BOX is a mini car by Honda. Aside from these automobiles, Honda also makes a wide range of motorcycles. The bikes made by Honda embrace tourer bikes, sports tourer bikes, journey bikes, road bikes, as well as scooters and filth bikes. Just as the popularity of Honda automobiles is greater in the U.S., the recognition of Honda bikes could be very excessive within the Asian markets. Motorcycles account for less than a small part of the brand’s revenue and but their excessive gross sales signify robust brand awareness in the international market. Asian markets have seen immense progress in recent times. Financial progress has resulted in increased shopping for power of the middle class and the rise of a whole class of consumers interested by bikes priced within the mid-range.
Honda bikes are comparatively economically priced compared with other sports activities bike and road bike models promoting in the Asian markets. This is additionally a purpose behind the high reputation of these bikes in Asia. Moreover, Honda’s gross sales and service network in these markets can also be robust which has resulted in better buyer expertise and led to larger sales of Honda’s motorbike merchandise. Within the U.S., in depth reach and aggressive pricing have led to superior financial results for Honda. Aside from its premium car vary Acura, the other automobiles are priced competitively. They are thought-about extremely efficient when it comes to performance and go well with the life-style of recent clients. Three of Honda’s automotive fashions have been in the prime twenty greatest selling automotive models in the U.S. in 2018 including Honda Accord, Civic and CRV. The massive vary of automobiles by Honda cater to the varying needs of consumers and match nicely in the totally different life of numerous buyer segments.
Different products made by Honda embrace Honda Jets and energy products. Mild Jets made by Honda have grown swiftly in reputation. These mild jets are well-liked for his or her revolutionary designs as well as trendy look. With engines mounted over their wings, these jets deliver improved aerodynamic performance. Honda mild jets turned one of the best sellers in their class through the first half of 2019. The company delivered 17 of them until August, 2019. The over the wing engine mount configuration, aside from decreasing drag occurring during excessive velocity flights, additionally allows for greater gasoline effectivity and quicker flight speeds. Supply of Honda Jet aircrafts began throughout December, 2015. Honda additionally manufactures a wide range of power products together with common function engines, turbines, water pumps, garden mowers, driving mowers, robotic mowers, brush cutters, tillers, snow blowers, outboard marine engines, walking assist units and moveable battery inverter power sources. For fiscal 2019, the income of Honda group from power merchandise and the opposite companies was ¥350.9 billion compared to ¥347.0 billion the earlier yr.
Robust motorbike gross sales in Asia :
Financial progress in the Asian markets has accelerated in recent times. China has emerged as the most important market for cars and develop into the favorite funding vacation spot for all the main car manufacturers. Most leading vehicle corporations are focusing upon producing regionally to develop their sales in China and to regulate working prices. Honda cars has seen the very best success in U.S. followed by its domestic market Japan. Nevertheless, on the subject of motorcycles, Honda motorcycles take pleasure in heaviest demand and gross sales in Asia. In comparison with North America, Europe, Japan or the opposite regions of the world, the gross sales of Honda motorcycles is the very best within the Asian area. In 2018, the Honda group bought 18.224 million models of motorcycles within the Asian market and generated revenue equal to ¥1375.2 Billion. Whereas motorbike revenue was a small portion of the corporate’s complete income in 2018 (around 13% solely), the excessive unit sales indicate robust reputation and brand fairness. It additionally exhibits robust brand awareness within the Asian markets.
International community :
Honda’s robust international community which includes its manufacturing and meeting crops, distributor network and firm’s regional workplaces can also be a serious power of the brand that has helped it keep its robust presence globally. All through the globe, from Asia to Europe and North America, the company has managed robust presence with the help of its distributors. U.S. being its core market, has seven manufacturing and assembly crops in addition to a dense sales network to cater to the heavy demand out there.
Japan has ten Honda manufacturing and meeting crops and China additionally has nine. Aside from its round 30 principal crops, the corporate additionally has smaller crops and regional workplaces situated across the globe. The company itself is headquartered in Tokyo, Japan. All the Honda group consists of 435 corporations of which 364 are consolidated subsidiaries and 71 are affiliate corporations, accounted for underneath the equity technique.
Vehicle Sales Weak in Asian markets :
The Asian markets are the main playground of the car brands. All the key vehicle corporations are investing in building local infrastructure in China and other Asian markets. Several of them have entered into partnerships with the native vehicle companies in China to grow their sales and manufacturing community there. China is now the most important marketplace for cars. Nevertheless, Honda’s penetration of the Chinese language auto market is low compared with the opposite leading rivals like Volkswagen, Ford or Common Motors. Until, Honda grows its penetration of the Chinese language market by producing new fashions regionally based on the local demand and shopper expectations, it might lose the race to other leading car brands. Even if the China market has seen a slight decline in demand in 2019, it’s nonetheless the most important marketplace for auto companies. Honda can develop new fashions solely targeted at the Chinese language shoppers. It will help Honda strengthen its customer base in the native market and combat the competitive strain whereas additionally protecting manufacturing costs beneath management.
Excessive dependence on core markets U.S. and Japan :
The whole Asian market excluding Japan accounted for lower than 25% of Honda’s income in 2018. North America, which is the most important market for Honda products accounted for greater than 50% of the company’s income in 2018. U.S. alone accounted for more than 45% of the income of the group. Nevertheless, whereas the gross sales of Honda in U.S. and Japan are larger, the company will depend on these two markets for most of its gross sales. Because of low penetration of the Chinese market, particularly in the vehicle phase, the corporate has to depend upon its other two fundamental markets. Its motorbike gross sales in Asia are larger than the other regions but they constitute a very small a part of its revenue which is lower than 15% of complete. In Europe too, the corporate has continued to lose market share. For decreasing its dependence on the two essential markets, the corporate would have to improve its penetration of China and the main European markets.
For previous some years, Honda has been coping with a really excessive number of car recollects. Between 2008 and 2017, the company had made greater than 11 million recollects. Whereas car recollects on the one hand signify attention to passenger security and product high quality, then again, the automobiles made by Honda have additionally continued to lose shine. Honda’s financials look in great situation however the automobiles together with Civic have continued to fall in high quality rankings. Even the CEO, Takahiro Hachigo accepted that Honda had lost its Mojo and was not the same firm, it was years in the past. In 2013 and 2014, the corporate had made five recollects back to again of its hybrid automobiles as a result of transmission defects. In 2018 and 2019 additionally, the company made numerous recollects. It recalled around 1.6 million automobiles over Takata airbag defects in 2019. Recollects over safety and product defect points are widespread in the vehicle business. Nevertheless, Honda must take this stuff critically because otherwise its automotive models will continue to lose shine.
Organisational construction and paperwork :
Of all the most important problems Honda has dealt with for several years, the severest are its complicated organisational construction and pink tape. Pink tape contained in the organisation has principally stopped it from investing in new innovations and latest technologies. Present CEO of Honda had highlighted this drawback some years back. For previous two-three years, he has been working upon solving it. Nevertheless, until Honda simplifies its organisational structure and removes the purple tape, it’ll start reflecting upon its bottom line before anticipated. If Honda lost a lot of its shine in a decade, it was because of the paperwork inside the organisation and because the company could not take the proper steps to safe its place in the auto business. The setting is growing increasingly more difficult and the corporate needs to be highly flexible to answer the quick changing surroundings. An easier organisational structure will make it an agile organisation and enable it to take challenges and respond to altering customer expectations at larger velocity.
Electrical automobiles :
The demand for electrical automobiles is rising all over the world. Individuals need automobiles that are gasoline efficient and free from dangerous emissions. The adoption fee of plug in hybrids and electrical automobiles has grown quick. China is main the world as the most important market for electric automobiles. In 2018, the gross sales of plugin automobiles globally including plugin hybrid automobiles and all electric automobiles reached 2.1 million models. Plugin hybrids comprised 69% and electrical automobiles 31% of the entire sales in 2018. China was the most important market where the gross sales of EVs and plugins reached 1.2 million automobiles. 56% of all the sales of plugin automobiles in 2018 befell in China. Within the U.S. as nicely, plugin gross sales increased by 79%. Tesla bought more than 128,000 models of its Model three throughout Q1 and Q2 of 2018. Including Mannequin S, X and Mannequin three, Tesla bought greater than 158,000 EVs through the first two quarters of 2018.
Honda has remained lots much less aggressive whereas getting into the EV market compared to other main car manufacturers. Other brands are investing aggressively in plugins and electrical automobiles. Manufacturers like BMW, Audi, Ford, Toyota and so forth are all investing in electrified fashions and forming partnerships to quicker grow their share in the electric car market. Nevertheless, Honda’s pace is far slower in this space.
Asian markets and mainly China :
The China market has grown into the world’s largest market for cars. Both U.S. and China are the main markets for vehicle brands. Vehicle corporations are growing their penetration of China via local partnerships and by investing in local manufacturing infrastructure. Honda’s sales are high in North America however its penetration of the China market continues to be comparatively low. In different Asian markets too, gross sales of Honda bikes are high but that of Honda automobiles low. Honda has retained most of its concentrate on its domestic market and the USA. Nevertheless, with growing potential of China as a marketplace for automobiles and bikes, ignoring it’s going to imply dropping a serious alternative.
Aside from investing in the progress of its electrical car portfolio, Honda also needs to focus upon growing its manufacturing and sales community in China to realize superior gross sales there. The car business is experiencing a slight decline in 2019 but the Chinese market continues to be filled with opportunities and not simply China however other Asian markets like India, Malaysia, Singapore and so on also maintain vital progress opportunities for Honda.
Relatively than depending upon its core merchandise solely and the core markets, Honda ought to try to broaden its product portfolio to incorporate more hybrids and EVs in addition to spend money on the newest technologies for a smoother transition into the subsequent era of mobility.
Investing in autonomous driving know-how may also show worthwhile for Honda. All the leading vehicle brands are investing in autonomous driving applied sciences. Several of them have partnered to work together on this know-how. Tesla’s autonomous driving know-how is considered to be probably the most superior and the safest. Investing in autonomous driving know-how may even help grow the demand for the prevailing models of Honda. Autonomous driving and IoT are thought-about to be the way forward for mobility. The transportation business goes via a part of transformation. To sustain demand and gross sales of its products, the company should spend money on these applied sciences. Related automobiles with digital interfaces and automated driving options will define the future of mobility. These technologies can develop the attraction of Honda’s portfolio.
The level of regulation of the car business throughout the world has grown lots. In the U.S., legal guidelines are stringent requiring corporations to pay special consideration to compliance in areas together with passenger safety, product high quality and labor. With larger regulation, the entry and exit limitations are larger as well as quicker progress might be troublesome. Incumbent players are forming alliances for progress and enlargement worldwide. Moreover, the extent of fines have grown and could be a vital proportion of the web income of a brand. From U.S. to China and Europe, legal and regulatory businesses have adopted stricter legal guidelines. Companies should watch out relating to tax legal guidelines and tariffs as properly. Several international businesses have complained how rising tariffs are hurting their companies.
Competitive strain :
Rising competitive strain also poses an enormous menace earlier than the car brands. Larger competitors has led to greater progress related strain and increased working costs. In 2018, Honda invested greater than $7 billion in analysis and improvement. Furthermore, with rising competition, brands additionally should focus extra on advertising in addition to know-how and product innovation. A few of the main rivals of Honda embrace Ford, Toyota, Volkswagen, BMW and Hyundai. All of Honda’s rivals make investments quite a bit in research and improvement as well as advertising. They are investing aggressively in newest applied sciences in addition to market enlargement. Honda’s vehicle market share is high in Japan and U.S. but weak in Asia. With larger aggressive strain, the company’s working expenditure has also grown larger. Working prices of Honda grew by 4.four% to ¥15,162.2 billion in 2018 as in comparison with the previous yr. Its prices of sales additionally grew by 4.eight% in 2018 as in comparison with last yr.
Rising prices of raw materials and labour:
Costs of uncooked materials and labour have grown fast in recent times which displays within the rising operating prices and expenses of Honda. Furthermore, because of rising concentrate on customer experience and product quality, the company is investing more in its human assets and good high quality raw materials. These elements are driving the prices greater. Nevertheless, holding in mind the extent of competition in the business in addition to rising expectations of consumers, these bills are important. Honda needs to retain its market share and leading place for which it will need to spend money on both the things. With growing rivalry within the vehicle business the need for gifted staff has also grown.
Honda is likely one of the leading vehicle manufacturers within the international market. It has a large market share in each Japan and america. Nevertheless, Honda may have to focus upon the China market to grow its gross sales there. Its mild Honda Jet has additionally turn into successful and was among the many greatest promoting mild jets of 2019 through the first half of the yr. Honda bikes are in style in the Asian markets. Honda’s give attention to type, performance and aggressive pricing has helped it purchase a large market share in the Asian motorbike market. For quicker progress Honda should focus upon technological innovation and spend money on the newest applied sciences like AI, autonomous driving know-how and digitalization. As clients’ life have changed, so have their expectations and demand.
The worldwide vehicle market has entered a challenging part in 2019. Demand and sales have fallen compared to final yr. Nevertheless, the demand and sales of electric automobiles is rising larger in 2019 and this development is predicted to continue within the coming years. Tesla’s gross sales in 2019 present that the recognition of electrical automobiles has grown. Honda too should focus upon growing its lineup of electrical automobiles and hybrids. This modification has come considerably abruptly and will profit the brands which were investing extra aggressively in electrified automobiles. Customer experience also needs to be a prime priority for Honda. Honda has a big product portfolio and that provides the corporate some additional edge. Nevertheless, it should not remain behind within the race for know-how. Investing in autonomous driving and electrical automobiles which assist it retain its place when new tendencies and know-how are taking mobility into a new period.
HONDA MOTORS Annual Report 2019.