(Bloomberg) -- Honda Motor Co. forecast another year of record profit on solid demand for hybrids in the US and two wheelers in Asia. 

Japan’s second-largest automaker said it expects an operating profit of ¥1.42 trillion ($9.1 billion) for the year through March 2025, mostly in line with the market’s consensus of ¥1.43 trillion and above its own February projection of ¥1.25 trillion. 

“Honda posted a conservative guidance, and its likely that the company will revise it upward later,” said Bloomberg Intelligence analyst Tatsuo Yoshida.

For the year that just ended in March, Honda reported a record operating profit of ¥1.38 trillion, up 77% from the prior year. 

It also announced plans to repurchase as much as 300 billion yen, or 3.7% of its shares, the most it’s ever paid out. Honda and other Japanese companies have been under pressure to boost returns to shareholders, and the company said this was a priority for management. 

Like its Japanese peers, Honda have benefited from a surge in demand for hybrids, as higher interest rates and fading subsidies weigh on sales of EVs. 

Honda said it expects to sell 1 million hybrid vehicles this year, and that the category should continue adding to the company’s profits even as it shifts to more EVs.

“We aim to produce 2 million hybrids by 2030 and use that cash for electrification,” Honda Chief Executive Officer Toshihiro Mibe said during a news conference. “Hybrids are our original weapon and we will keep using that in our business.”

Honda is trying to catch up with rivals in the global shift to EVs, and plans to spend C$15 billion ($11 billion) to build out its electric-vehicle supply chain in Canada. It also plans to start manufacturing its first US-made fully electric vehicles in Marysville, Ohio next year and is targeting electrified cars to account for 100% of sales by 2040. Mibe said the recent slowdown in EV sales will not affect its plans.

Honda in March teamed up with rival Nissan Motor Co. to collaborate on core technology for battery-based electric vehicles, including software. Mibe said he has been in frequent discussions with Nissan CEO Makoto Uchida regarding the alliance, and that the two sides should come to a conclusion soon. More information regarding investments and EVs will be announced next week in a business update, he added.

In China, Honda has launched two EV models as part of its newly announced Ye series in April to compete with local EV makers such as BYD Co.. The models will go on sale later this year as part of the Japanese company’s aim to introduce a total of 10 EV models in China by 2027. 

Japanese automakers have struggled in the China market, where they faces tough competition from local EV manufacturers. Honda Vice President Shinji Aoyama said it will introduce competitive EV models in the country this fiscal year, and work with its local joint venture partners to address surplus production capacity.

Honda set its assumed foreign exchange rate at 140 yen against the dollar. The yen’s recent weakness is generally considered beneficial for Japanese manufacturers, but Chief Financial Officer Eiji Fujimura said volatility “wasn’t desirable” for the company. He also said Honda may move more production to Japan if domestic demand increases, adding that a shift in manufacturing back home by domestic companies could in theory boost demand for the yen.

 

 

 

 

(Adding executive’s comments, background on hybrids)

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