Honda predicts green car sales to boost profits

Honda Motor Corp. raised its full-year profit forecast Tuesday, on expectations of growing demand for fuel-efficient cars.

The prediction came even as Japan's No. 2 automaker reported a drop in its latest quarterly earnings by more than half.

Honda Motor Co. ADRs 3-month chart Honda expected tax incentives in Japan and China for lower carbon emission vehicles to boost sales. It projected a profit for the fiscal year ending in March to be $1.7 billion US. That was almost four times what it estimated in the spring.

Net income for the three months to September fell 56 per cent from the period a year earlier to $587 million. A strong yen and a weaker global market hit sales.

Honda, which makes the Insight gas-electric hybrid and Accord sedan, said quarterly revenue fell 27.2 per cent from a year earlier to $22.4 billion.

Still, the drop in sales was not as great as analysts had expected.

"The numbers were surprising," said Yoshihiro Okumura, auto analyst with Chiba-gin Asset Management. Okumura said a bigger fall in profit was avoided by strong sales in Japan, driven by the green car tax incentives and good sales numbers in Asia.

The automaker raised its forecast for sales this fiscal year to 3.4 million vehicles, up from the 3.9 million in its July projection but still less than the nearly 3.52 million it sold worldwide in fiscal 2008.