Honda Profit Beats Estimates as China Offsets Recalls

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Honda Motor Co. reported profit that beat analyst estimates as gains in China overshadowed a rise in recall-related expenses.

Net income rose to 186 billion yen ($1.5 billion) in the quarter ended June from 155.6 billion yen a year earlier, the Tokyo-based company said on Friday. That exceeded the 138.6 billion yen average of six analysts’ estimates compiled by Bloomberg.

Honda and other Japanese carmakers have bucked a slowdown in the world’s largest vehicle market this year. The carmaker boosted China sales by 30 percent in the first half as it introduced new compact and crossover models. Its performance in China helped Honda partly offset slumping sales in Japan and Southeast Asia.

“China is one of the very few bright spots in their business,” Koji Endo, an auto analyst at Advanced Research Japan, said before the earnings announcement. “But still, as competition worsens and market goes down, it’s hard to imagine they can maintain such rapid growth for long.”

While major Japanese carmakers in China have boosted sales faster than rivals this year, some executives have warned of a price war in the market.

Fumihiko Ike, chairman of the Japan Automobile Manufacturers Association and also Honda chairman, said earlier this month China’s vehicle market has shown signs of a “downward spiral” that will eventually hit Japanese carmakers.

Industrywide passenger-vehicle sales are projected by the China Association of Automobile Manufacturer to grow about 6 percent in 2015, headed for the slowest expansion in four years as economic growth moderates and cities cap vehicle registrations.

Honda’s expenses including costs associated with product recalls rose by 47.6 billion yen in the first quarter. The carmaker this month called back 4.5 million vehicles globally in connection with Takata Corp. air bags, expanding the total recalled vehicles to more than 24 million units.

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