Honda’s Annual Profits Expected to Drop 63 Percent Due to Earthquake Impact

Like rival Japanese automaker Toyota, Honda today announced that its fiscal-year 2012 profits will take a serious blow in the wake of the March 11 earthquake and tsunami that crippled the Japanese auto industry. Honda expects net income will drop from 534 billion yen (about $6.63 billion) in financial-year 2010 to just 195 billion yen (about $2.4 billion) in 2012.

The drastic decline in profits is primarily due to reduced vehicle sales after factories were shuttered due to the natural disaster. Honda expects to sell 3.3 million cars globally for financial-year 2012, down from 3.51 million in 2011. The company also says the increased raw material costs, investment in new products, and the increasing value of the Japanese yen have eroded profit margins.

Honda factories in Japan will return to normal production levels by the end of this month, but those overseas (including in the U.S.) may not reach 100-percent capacity until August or September. This means a reduced supply of new vehicles, which is expected to shrink Honda’s market share in the U.S. by 11 percent, according to Automotive News. The 2012 Civic will be significantly delayed for this reason. Honda sales in the U.S. through May 2011 are down 16.1 percent compared to the first five months of 2010.

Sources: Honda, Automotive News

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