Honda Atlas Car’s performance for half year ending September could serve as a classic example of how badly things can go wrong for businesses and manufacturers in an environment of rapid currency depreciation.
The company announced net earnings of Rs314 million from a loss of Rs71 million in the same period of last year. However, underneath this reasonably six month recovery is hidden a dismal second quarter performance, stemming from meteoric rise in other expenses, owing to exchange loss due to eight percent rupee depreciation.
An impressive recovery in volumes failed to translate into dividends for HCAR’s investors, despite continued excitement among customers for Honda’s new models launched last year. Total HCAR sales grew by nearly 50 percent year on year, as the number of new Honda Civics on the streets more-than-doubled, clocking in at 5,884 units.
There was still some pleasant news for the bosses in Tokyo as the company successfully wrestled market share from Toyota and Suzuki in the luxury car segment. The second quarter market share for HCAR stood at 42.5 percent, up ten percentage points over the same period of last year. Honda’s sales are now trailing closely that of category leader Toyota, whose sales went as high as seventy percent of the total segment back in FY12.
Whether the mixed performance report card gives Honda reason enough for jubilation remains debatable. The third quarter period is historically marked by poorest sales for auto assemblers, as preference for cars with new-year registration picks up vogue among customers. This has been neatly depicted by the Pakistan Automobile Manufacturers’ Association (PAMA)’s sale numbers for October, which recorded more than 12 percent decline in Honda sales on a month-on-month basis.
The excitement for latest Civic brewing since last year is also expected to die down in the coming months, as luxury segment customers have begun to delay purchases in the anticipation of new Corolla model slated to be launched in second half of CY14.
Whether Honda’s newly gained market share rests on thin ice depends as much on company’s strategy as it does on customer loyalty. The company’s plans to launch CRZ hybrid later this month shows its resolve to attract customers through quality innovation and product differentiation in a segment devoid of volumes. Here’s to hoping that the USD-PKR exchange rate won’t get any more worse, allowing HCAR to salvage its bottom line in the second half of FY14.