Challenges Faced by Automobiles
Automobiles have long been the main form of transportation on the roads. They are the vehicle of choice for a variety of uses, such as going to work or carrying passengers. However, the automotive business has faced significant challenges in recent years. A major challenge is the continued growth of EVs. It is expected that the introduction of more EVs will decrease margins in the core business segment. Honda faces a number of challenges, including a lack of manufacturing capacity for EVs and a large investment needed to develop EV technology. Despite this, management believes that margins can improve over time.
One of the challenges facing Honda is its exposure to the North American market. The company has been very successful in its motorcycle business. However, it has limited presence in light and medium vehicles. In order to better address these issues, it is targeting emerging markets in Asia and Latin America.
Motorcycles have been growing in volumes in the Asian markets, allowing Honda to build a strong foothold in these countries. However, the company has been challenged by increasing competition from manufacturers like TVR and Baja. These Indian manufacturers are a challenge to Honda’s long-term strategy.
Honda has been able to leverage its position in the South East Asian market to increase its profitability. The company’s sales in Southeast Asia rose 45.8 percent to 800,357 units in 2010. This increased sales volume was attributed to a robust economy and low interest rates. Nevertheless, these markets have a relatively young history and Honda needs to invest more in developing them.
Honda’s motorcycle business has been successful, with a high return and large volumes. To complement this, the company has focused on expanding its production network globally. In order to enhance its global production capabilities, the company will reduce the number of trim variations for global models.
Honda is investing in technology to help improve safety. In addition to this, it has begun to ramp up its quarterly dividend payments in order to reflect improved conditions.
Honda is also taking on the task of improving its supply chain. Previously, it lacked efficiency in this area, but its new acquisition of Hitachi Automotive Systems has improved the situation. Honda will now be able to introduce more common parts to global models.
Honda has also been working to improve its R&D. It is investing in areas such as carbon neutrality and autonomous driving. It may also consider expanding into neighboring markets, such as Argentina and Colombia, following its expansion in Brazil.
Vehicle ownership is increasing rapidly. More than one million cars were sold in the US in 2012. According to the Society of Automotive Engineers, the number of registered automobiles is projected to rise by five to ten percent annually. While this has been a welcome development for Honda, the automotive segment is still facing challenges.
Besides expanding into new markets, Honda also needs to improve its sales mix. The company is looking at expanding its presence in light and medium vehicles. However, the motorcycle segment remains a key part of its earnings. Fortunately, the operating margin for motorcycles has improved over the last decade.