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An investor’s guide to Honda Motor Company: Revenue and drivers

William Lowry, CFA

A must-know investor's guide to Honda Motor Company (Part 2 of 7)

(Continued from Part 1)

Revenue and drivers

We’ll take a brief look at industry sales to assess Honda Motor Company’s (HMC) position in the global industry. First, we’ll look at industry sales, and second, we’ll assess Honda’s ability to capture its share of the market. As we’ve seen, the top industry players are Toyota Motor Corporation (TM), General Motors (GM), Volkswagen (VOW), and the BMW Group (BMW). The exchange-traded fund providing industry exposure is CARZ. The next important consideration is where Honda is selling its vehicles.

The chart above shows the regional changes in the automobile industry over the past five years. The big takeaway from this chart is the explosion of the Asia Pacific market from 20 million units in 2009 to 36 million units in 2013, driven by market demand in China. This boom offset the decline in Europe and the lower growth in North America. Latin America remains a small but significant market.

Where Honda’s hot and not

Honda largest market is the North America. where it sells 41% of it’s annual production as the chart above shows. North America is an $18.3 million-a-year market, giving Honda a 10% market share in North America versus a 4% global share. The second-largest market for Honda is Asia, which includes China. In its annual filing, Honda reports selling approximately 750,000 units in China—a $22 million-a-year market. This puts Honda’s Chinese market share at approximately 3.4% versus 4% globally. This isn’t too far behind its global share. In Europe, Honda sells just 169,000 units, giving it a 1% market share. As we’ve seen in prior Market Realist automobile series, Europe is an oversupplied market where competitors struggle to profit.

Honda focuses on where it’s most likely to succeed. Now let’s find out why this matters in the next part of this series.

Continue to Part 3

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