2008 Honda SALES & PRODUCTION FORECAST

TOVA Narrative

When Honda made their shock announcement of their immediate withdrawal from competing in Formula-1, the reason they gave was the economic slowdown. Citing a massive 32% reduction in sales in the crucial U.S. market, Honda said they needed to re-assess their business operations in order to ensure that they remain a profitable business over the long term. The 2008 Year End speech given by their C.E.O. Mr. Takeo Fukui gave us some invaluable insights into how Honda plans to weather this current economic storm and what they are planning to do for the future. In the meantime, Honda has also released their most current 2008 annual sales and production forecast and the results - as I had suspected back when the withdrawal from F1 was made - is not truly the doom and gloom that it was made out to be then.

The official forecast figures as listed in the Honda official press release is below. To quickly summarize, Honda is actually forecasting no reduction in total sales for 2008 when compared to 2007, i.e. that expected total sales for 2008 is the same as 2007 at approx 3.8 million units for automobiles. Actually they do expect 11,000 units more in sales for this year, but of course when seen within the 3.8million total, the extra amount is but trivial. This is actually already inclusive of the 'disastrous' 32% sales drop for the U.S. market in November and is quite certainly inclusive of a very pessimistic forecast for this month (December 2008). Nevertheless set against that message of gloom just a week or so earlier, Honda actually seems to be doing reasonably well in light of the economic situation now as many had no doubt been expecting Honda to announce massive drop in sales for this year. Of course there must surely be some other manufacturers who would be more successful than Honda this year (i.e. perhaps they might actually even see an increase of sales for this year), perhaps one of the manufacturers still competing in Formula-1 whom are all seemingly quite optimistic about their sales for this year.

In terms of market breakdown, Honda sees five market segments outside of their domestic (JDM) market. And they are actually forecasting an increase in sales for all of them except the crucial North American (U.S. + Canada) market. They see an increase ranging from 1% (for Europe) to as high as 34% (for South America). Even for the N.A. market, the initial gloom from that legendary 32% sales drop in November is still translated to 'only' a 7-8% drop in total sales for the year. Unfortunately the N.A. market is so humungous that even this relatively modest 7-8% drop is enough to totally negate the growth in all the other markets combined. So with domestic sales forecasted to be stagnant for 2008, thus the total annual sales for 2008 is forecasted to be at the same level as 2007.

In terms of production, Honda has announced an over-production of approx. 188,000 units for 2008 (total production minus total sales forecast). This is obviously the incentive for the recently announced planned reduction in production for a number of Honda's U.S. plants over the next two months (by randomly stopping production for a day each time).

Do note that forecasted sales of motorbikes sees a 12% growth over 2008 with Honda lamenting that it could have been higher if not for the economic slowdown. Even with the impact of the slowdown, Honda is still forecasting a new record in sales for their motorbikes for this year.

The full details of the sales and production forecast is below.

Detailed Sales and Production Forecast Figures

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Information Source : Official Honda Press Release

Wong KN
December 2008
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