Honda's hot-selling Chinese crossovers boost profits, outlook

Honda Motor Co. raised its forecast for full-year profits as demand for Vezel and XR-V crossovers surged in China, the carmaker's second-largest market.

Net income probably will rise to 415 billion yen (29 billion yuan) in the fiscal year ending in March, more than the 390 billion yen forecast in May, according to the Tokyo-based automaker. 

Honda boosted deliveries of the Vezel and XR-V models each by more than 50 percent as carmakers in China benefited from a sales tax cut for vehicles with small engines. China's government may extend the tax cut which is scheduled to expire this year. Higher sales in China could help Honda rebound from costly recalls of faulty Takata Corp. airbags.

"Their redesigned models, especially the small crossovers, are giving them a strong boost," said Seiji Sugiura, an analyst at Tokai Tokyo Research Center. "We expect the Chinese government to take some action, further supporting the industrywide growth, and Honda will continue to benefit."

For the first nine months, Honda sales in China have jumped 26 percent to 872,104 vehicles. For the same period, industry sales of passenger vehicles have risen 15 percent to 16.75 million cars and light trucks.

As sales climb, Honda has revived plans to expand production in China. The carmaker will begin work on a new assembly plant this year that is scheduled to begin operation in 2019.