Automobiles, the term commonly used to describe vehicles with wheels and a drivetrain, have been around for more than a century. However, the automobile industry has been in a rough spot, particularly in North America. Automotive manufacturers have been relying on government subsidies and low interest rates to stimulate sales. But the numbers have been steadily improving over the last decade. In fact, automobile sales hit a record high in 2012 of 1.43 million. This represents an increase of nearly 50% over the previous year’s sales, according to Autodata.
Aside from the obvious benefits of driving a car, the automobile industry also boasts numerous technological innovations. For instance, many cars feature aerodynamics, which help them glide through the air. Similarly, innovative materials are being used to construct body styles that resemble aircraft. And the latest technology will soon be applied to motorcycles.
Honda has a notable presence in Africa. The company is not alone in this respect, as several Chinese brands also operate in this region. As such, it is possible that the company will eventually expand into neighboring markets. Perhaps the logical next step would be in Colombia. Meanwhile, the manufacturer is making progress in integrating its global production network.
Motorcycles are gaining ground in many Asian markets, including Japan, Korea and China. They remain the most important segment for Honda, which makes it essential to have a strong foothold in these countries.
Despite the growth of this vehicle type, motorcycles still represent a small percentage of total auto sales. However, the demand for motorcycles is growing, as evidenced by the 5286 motorcycle-related deaths that occurred in 2016. Moreover, the number of registered motorcycles is increasing every year. Therefore, this category is a logical place to focus Honda’s attention and investment.
Nevertheless, the motorcycle is a complex product, which is reflected in the relatively high cost of its manufacture. The company has largely relegated this division to the lower end of its product lineup, while it has expanded its presence in higher-end and lighter-weight motorcycles. It will be a key part of its global strategy in the coming years. Interestingly, Honda’s net cash balance has grown over the past five years, and has now reached more than $2 billion.
One of the biggest challenges facing Honda is the development of its electric vehicle (EV) line. These vehicles are expected to make up a larger share of the market in the near future, thereby reducing margins at the core business. Even more problematic is the cost of developing these vehicles, which could hamper earnings over the long term.
Honda’s free cash flow has been positive for the past five years, and the company’s balance sheet is solid. Management is confident that its margins will improve over time.
Other noteworthy achievements include its acquisition of Hitachi Automotive Systems and its integration of affiliated firms into its supply chain. Furthermore, the company has begun to increase its quarterly dividend payments in an effort to reflect the improving economic conditions.