The Jazz Sport. Picture: HONDA
The Jazz Sport. Picture: HONDA

Tokyo — Honda Motor raised its full-year forecast operating profit forecast on Tuesday, after posting a surprise rise in quarterly earnings due to higher vehicle sales in North America and a rise in motorcycle sales in Asia.

Japan’s number three car maker now expects an operating profit of ¥710bn for the year to March 2019, compared to an earlier view of ¥700bn, as it expects to take a smaller hit from a stronger domestic currency. The revised forecast represents a 15% decrease on the year.

However, it downgraded its global group vehicle sales forecast as it expects floods in Mexico to cut production by 75,000 units over the year, resulting in lower sales in North America.

Honda expects to sell 5.29-million vehicles globally in the year to March, still a record high but lower than a previous estimate for 5.38-million units.

For the first quarter, its global vehicle sales rose 3%, lifted by a 7.7% increase in North America, while sales rose 3.2% in Japan. Sales were slightly lower in Asia, its biggest regional market. The company said it was selling more of its Pilot SUVs in the US, a key market, where buyers continue to shun its mainstay Civic and Accord sedans.

In China, the car maker has been facing a slump in sales amid a quality issue with popular models. Sales in the world’s biggest vehicle market have been hit over the past months after it was detected that excess oil was accumulating in its popular CR-V SUV model’s oil pan. This led to a recall and sales suspension of the model in China up to and throughout May, leading to a 6.4% slide in annual sales in the country in the first six months of 2018.

Earlier this month, Chinese authorities also recalled about 300,000 of the Civic for the same issue.

Operating profit at Honda rose 11.2% to ¥299.3bn for the April-June quarter, compared to ¥269.2bn a year ago. This beat an average estimate for a drop to ¥250bn from six analysts polled by Thomson Reuters.

Like its rivals at home and abroad, Honda is bracing for a possible rise in US tariffs that could significantly raise the cost of doing business in the world’s second largest car market. Honda said it had not made any decisions on whether to change its operations if the tariffs are implemented.