3/20/2020 A Detailed SWOT Analysis of Honda Motors 2019.

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HONDA MOTORS SWOT ANALYSIS 2019.

INTRODUCTION
STRENGTHS
WEAKNESSES
OPPORTUNITIES
THREATS
CONCLUSION

Company Name Honda Motors.

Founded 1948.

Founder Soichiro Honda, Takeo Fujishawa.

CEO Takahiro Hachigo.

Headquarters Tokyo, Japan.

Revenue (2019) ¥15,888.6 Billion.

Net Income ¥610.3 Billion.

Number of Employees 219,722

Largest Market United States.

Introduction
Honda is one of the leading automobile brands with a global footprint. It is headquartered in
Japan and sells its products worldwide. The  company has released several excellent models of
cars and motorcycles, popular in both western and asian nations. In recent years, the

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company is enjoying continuous growth in revenue driven by higher sales.  The business of
Honda is divided into four segments. Automobile segment is the largest of them. The
company is also investing aggressively in research and development to grow its market share
in the global automobile market. 

North America and mainly U.S. is the largest geographical business segment of Honda. The
company also has a strong presence in its domestic market. The automobile industry is
undergoing a major transformation and the evolution of technologies like AI and autonomous
driving has brought several new opportunities for the auto firms. Honda also has a large
number of manufacturing and assembly facilities worldwide. In the U.S. alone, the company
has seven facilities. In 2019, the automobile industry has entered a challenging phase. Even in
the leading markets, sales have started fallen during the first half of the year. Leading
automobile brands have formed partnerships to find faster growth and respond to changing
market dynamics.  Honda has maintained a strong position in the motorcycle industry in Asia.
However, in terms of car sales, its position in Asia and China is weaker compared to the
leading rivals. There are other challenges too before Honda, as the companies structure has
generally stopped it from moving nimbly. A large number of recalls have also haunted Honda
over the last several years. To emerge from these challenges, the company has to take a more
flexible approach and focus exclusively on research and innovation.

Read more about Honda – its strengths, weaknesses, opportunities and threats in a SWOT
analysis for 2019. 

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Honda Light Jet. Img src=Honda press release.

Strengths :

Brand equity : 

As an automobile business, Honda has managed a strong image. The company’s focus upon
technology, customer experience and product innovation has led to strong brand equity.
Apart from that, Honda enjoys high brand awareness in North America as well as Asian and
European markets. Strong brand awareness has also resulted in higher market share for the
brand. Among the several factors driving brand equity, Honda’s marketing strategy has also
played a key role in helping the company acquire a strong competitive advantage in the
automobile industry. Honda uses several marketing channels including its distribution network,
digital channels and other methods of promotions like auto-shows for promoting its brand
and products. Focus upon innovation has also brought superior results for Honda as it is
among the most trusted brands in U.S., one of the world’s leading vehicle markets.  

Honda’s global network of distributors and dealers has helped it maintain strong presence in
key markets around the globe. The company is also investing in customer engagement and
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superior customer experience. These things also drive consumer confidence in the brand and
its products. The auto industry has entered a challenging phase and focusing upon passenger
safety and customer experience will also bring superior results.

Strong presence in U.S. market :

Honda is one of the leading car brands in U.S. where its focus upon mobility, robotics and AI
have helped it gain higher market share. Its products including the luxury brand Acura have
continued to grow in demand. Honda has established seven manufacturing and assembly
plants in the United States. The locations of these plants include Alabama, Ohio, Georgia,
North Carolina, South Carolina and India. Ohio has 2 Honda plants. According to sources,
Honda’s market share in the U.S. was 9.1% in 2018.  The company generated ¥7,480.4 billion in
2019 in net revenue from the United states.

Honda is also the first Japanese automaker to begin production in the United States. It started
local automobile production in the United States in 1986 with the Honda Accord model. Later,
Honda expanded its production to include light truck models. It launched the Acura brand in
1986 and established an exclusive network in the United States. Moreover, U.S. is the single
largest market for Honda products that accounted for more than 45% of sales revenue of the
brand in the fiscal year 2019. 

Large product portfolio :

Honda has a large product portfolio that includes cars, motorcycles, aircrafts and aircraft
engines as well as motor parts. The company sells a large range of automobiles that include
passenger cars, light trucks and mini vehicles. The passenger cars by Honda include Accord,
City, Civic, Crider, Fit/Jazz. Its light truck models include CR-V, Freed, Odyssey, Pilot, Vezel/HR-

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V, XR-V. N-BOX is a mini vehicle by Honda. Apart from these cars, Honda also makes a large
range of motorcycles. The bikes made by Honda include  tourer bikes, sports tourer bikes,
adventure bikes, street bikes, as well as scooters and dirt bikes. Just as the popularity of Honda
cars is higher in the U.S., the popularity of Honda motorcycles is very high in the Asian
markets. Motorcycles account for only a small part of the brand’s revenue and yet their high
sales signify strong brand awareness in the global market. Asian markets have seen immense
growth in recent years. Economic growth has resulted in increased buying power of the
middle class and the rise of an entire class of customers interested in bikes priced in the mid-
range. 

Honda bikes are comparatively economically priced when compared with other sports bike
and street bike models selling in the Asian markets. This is also a reason behind the high
popularity of these bikes in Asia. Moreover, Honda’s sales and service network in these
markets is also strong which has resulted in better customer experience and led to higher
sales of Honda’s motorcycle products. In the U.S., extensive reach and competitive pricing
have led to superior financial results for Honda. Apart from its premium vehicle range Acura,
the other cars are priced competitively. They are considered highly efficient in terms of
performance and suit the lifestyle of modern customers. Three of Honda’s car models were in
the top twenty best selling car models in the U.S. in 2018 including Honda Accord, Civic and
CRV. The large range of cars by Honda cater to the varying needs of customers and fit well in
the different lifestyles of diverse customer segments.

Other products made by Honda include Honda Jets and power products. Light Jets made by
Honda have grown swiftly in popularity. These light jets are popular for their innovative
designs as well as stylish look. With engines mounted over their wings, these jets deliver
improved aerodynamic performance. Honda light jets became the best sellers in their class
during the first half of 2019. The company delivered 17 of them till August, 2019.  The over the
wing engine mount configuration, apart from reducing drag occurring during high speed
flights, also allows for higher fuel efficiency and faster flight speeds. Delivery of Honda Jet
aircrafts began during December, 2015. Honda also manufactures a large range of power
products including general purpose engines, generators, water pumps, lawn mowers, riding
mowers, robotic mowers, brush cutters, tillers, snow blowers, outboard marine engines,
walking assist devices and portable battery inverter power sources. For fiscal 2019, the
revenue of Honda group from power products and the other businesses was ¥350.9 billion
compared to ¥347.0 billion the previous year.  

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Strong motorcycle sales in Asia :

Economic growth in the Asian markets has accelerated in recent years. China has emerged as
the largest market for automobiles and become the favourite investment destination for all
the leading vehicle brands. Most leading automobile companies are focusing upon producing
locally to grow their sales in China and to control operating costs. Honda automobiles has
seen the highest success in U.S. followed by its domestic market Japan. However, when it
comes to  motorcycles, Honda motorcycles enjoy heaviest demand and sales in Asia.
Compared to North America, Europe, Japan or the other regions of the world, the sales of
Honda motorcycles is the highest in the Asian region. In 2018, the Honda group sold 18.224
million units of motorcycles in the Asian market and generated revenue equal to ¥1375.2
Billion. While motorcycle revenue was a small portion of the company’s total revenue in 2018
(around 13% only), the high unit sales indicate strong popularity and brand equity. It also
shows strong brand awareness in the Asian markets.  

Global network :

Honda’s strong global network which includes its manufacturing and assembly plants,
distributor network and company’s regional offices is also a major strength of the brand that
has helped it maintain its strong presence globally. Throughout the globe, from Asia to Europe
and North America, the company has managed strong presence with the help of its
distributors. U.S. being its core market, has seven manufacturing and assembly plants as well
as a dense sales network to cater to the heavy demand in the market. 

Japan has ten Honda manufacturing and assembly plants and China also has nine. Apart from
its around 30 principal plants, the company also has smaller plants and regional offices
located around the globe.  The company itself is headquartered in Tokyo, Japan. The entire
Honda group includes 435 companies of which 364 are consolidated subsidiaries and 71 are
affiliate companies, accounted for under the equity method. 

Weaknesses :

Automobile Sales Weak in Asian markets :

The Asian markets are the leading playground of the vehicle brands. All the major automobile
companies are investing in building local infrastructure in China and other Asian markets.

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Several of them have entered into partnerships with the local automobile firms in China to
grow their sales and manufacturing network there. China is now the largest market for
automobiles. However, Honda’s penetration of the Chinese auto market is low when
compared with the other leading rivals like Volkswagen, Ford or General Motors.  Unless,
Honda grows its penetration of the Chinese market by producing new models locally
according to the local demand and consumer expectations, it may lose the race to other
leading vehicle brands. Even if the China market has seen a slight decline in demand in 2019, it
is still the biggest market for auto firms. Honda can develop new models exclusively targeted
at the Chinese consumers. This will help Honda strengthen its customer base in the local
market and combat the competitive pressure while also keeping manufacturing costs under
control. 

High dependence on core markets U.S. and Japan :

The entire Asian market excluding Japan accounted for less than 25% of Honda’s revenue in
2018. North America, which is the largest market for Honda products accounted for more than
50% of the company’s revenue in 2018. U.S. alone accounted for more than 45% of the
revenue of the group. However, while the sales of Honda in U.S. and Japan are higher, the
company depends on these two markets for most of its sales. Due to low penetration of the
Chinese market, especially in the automobile segment, the company has to depend on its
other two main markets. Its motorcycle sales in Asia are higher than the other regions but they
constitute a very small part of its revenue which is less than 15% of total. In Europe too, the
company has continued to lose market share. For reducing its dependence on the two main
markets, the company would have to increase its penetration of China and the leading
European markets.

Vehicle Recalls:

For past some years, Honda has been dealing with a very high number of vehicle recalls.
Between 2008 and 2017, the company had made more than 11 million recalls. While vehicle
recalls on the one hand signify attention to passenger safety and product quality, on the other
hand, the cars made by Honda have also continued to lose shine. Honda’s financials look in

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great condition but the cars including Civic have continued to fall in quality rankings. Even the
CEO, Takahiro Hachigo accepted that Honda had lost its Mojo and was not the same
company, it was years ago. In 2013 and 2014, the company had made five recalls back to back
of its hybrid vehicles due to transmission defects. In 2018 and 2019 also, the company made a
large number of recalls. It recalled around 1.6 million vehicles over Takata airbag defects in
2019. Recalls over safety and product defect issues are common in the automobile industry.
However, Honda needs to take these things seriously because otherwise its car models will
continue to lose shine.

Organisational structure and bureaucracy :

Of all the major problems Honda has dealt with for several years, the severest are its complex
organisational structure and red tape. Red tape inside the organisation has mostly stopped it
from investing in new innovations and latest technologies. Current CEO of Honda had
highlighted this problem some years back. For past two-three years, he has been working
upon solving it. However, unless Honda simplifies its organisational structure and gets rid of
the red tape, it will start reflecting upon its bottom line sooner than expected. If Honda lost
much of its shine in a decade, it was because of the bureaucracy inside the organisation and
because the company could not take the right steps to secure its position in the auto industry.
The environment is growing more and more challenging and the company needs to be highly
flexible to respond to the fast changing environment. A simpler organisational structure will
make it an agile organisation and enable it to take challenges and respond to changing
customer expectations at higher speed.

Opportunities:

Electrical vehicles :

The demand for electric vehicles is growing around the world. People want cars that  are fuel
efficient and free from harmful emissions. The adoption rate of plug in hybrids and electric
cars has grown fast. China is leading the world as the largest market for electric vehicles. In
2018, the sales of plugin vehicles globally including plugin hybrid vehicles and all electric
vehicles reached 2.1 million units. Plugin hybrids comprised 69% and electric vehicles 31% of
the total sales in 2018. China was the largest market where the sales of EVs and plugins
reached 1.2 million vehicles. 56% of all the sales of plugin vehicles in 2018 took place in China.
In the U.S. as well, plugin sales increased by 79%. Tesla sold more than 128,000 units of its
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Model 3 during Q1 and Q2 of 2018. Including Model S, X and Model 3, Tesla sold more than
158,000 EVs during the first two quarters of 2018.  

Honda has remained a lot less aggressive while entering the EV market compared to other
leading vehicle brands. Other brands are investing aggressively in plugins and electric vehicles.
Brands like BMW, Audi, Ford, Toyota etc are all investing in electrified models and forming
partnerships to faster grow their share in the electric vehicle market. However, Honda’s pace is
much slower in this area.  

Asian markets and mainly China :

The China market has grown into the world’s largest market for automobiles. Both U.S. and
China are the leading markets for automobile brands. Automobile companies are growing
their penetration of China through local partnerships and by investing in local manufacturing
infrastructure.  Honda’s sales are high in North America but its penetration of the China
market is still comparatively low. In other Asian markets too, sales of Honda motorcycles are
high but that of Honda cars low. Honda has retained most of its focus on its domestic market
and the United States. However, with growing potential of China as a market for cars and
motorcycles, ignoring it will mean losing a major opportunity. 

Apart from investing in the growth of its electric vehicle portfolio, Honda should also focus
upon growing its manufacturing and sales network in China to achieve superior sales there.
The automobile industry is experiencing a slight decline in 2019 but the Chinese market is still
full of opportunities and not just China but other Asian markets like India, Malaysia, Singapore
etc also hold significant growth opportunities for Honda.

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Rather than depending upon its core products only and the core markets, Honda should try
to expand its product portfolio to include more hybrids and EVs as well as invest in the latest
technologies for a smoother transition into the next era of mobility.

Autonomous driving:

Investing in autonomous driving technology will also prove profitable for Honda. All the
leading automobile brands are investing in autonomous driving technologies. Several of them
have partnered to work together on this technology. Tesla’s autonomous driving technology is
considered to be the most advanced and the safest.  Investing in autonomous driving
technology will also help grow the demand for the existing models of Honda. Autonomous
driving and IoT are considered to be the future of mobility. The transportation industry is
going through a phase of transformation. To sustain demand and sales of its products, the
company must invest in these technologies. Connected cars with digital interfaces and
automated driving features will define the future of mobility. These technologies can grow the
attraction of Honda’s portfolio.  

Threats :

Higher regulation:

The level of regulation of the automobile industry throughout the world has grown a lot. In
the U.S., laws are stringent requiring companies to pay special attention to compliance in
areas including passenger safety, product quality and labor.  With higher regulation, the entry
and exit barriers are higher as well as faster growth can be difficult. Incumbent players are
forming alliances for growth and expansion worldwide. Moreover, the level of fines have
grown and can be a significant percentage of the net revenue of a brand. From U.S. to China
and Europe, legal and regulatory agencies have adopted stricter laws. Businesses have to be
careful regarding tax laws and tariffs as well.   Several international businesses have
complained how rising tariffs are hurting their businesses.

Competitive pressure :

Growing competitive pressure also poses a big threat before the automobile brands. Higher
competition has led to higher growth related pressure and increased operating costs. In 2018,
Honda invested more than $7 billion in research and development. Moreover, with growing

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competition, brands also have to focus more on marketing as well as technology and product
innovation. Some of the leading competitors of Honda include Ford, Toyota, Volkswagen,
BMW and Hyundai.  All of Honda’s rivals invest a lot in research and development as well as
marketing. They are investing aggressively in latest technologies as well as market expansion.
Honda’s automobile market share is high in Japan and U.S. but weak in Asia. With higher
competitive pressure, the company’s operating expenditure has also grown higher. Operating
costs of Honda grew by 4.4% to ¥15,162.2 billion in 2018 as compared to the previous year. Its
costs of sales also grew by 4.8%  in 2018 as compared to last year. 

Growing costs of raw material and labour:

Costs of raw material and labour have grown fast in recent years which reflects in the rising
operating costs and expenses of Honda. Moreover, due to growing focus on customer
experience and product quality, the company is investing more in its human resources and
good quality raw materials. These factors are driving the costs higher. However, keeping in
mind the level of competition in the industry as well as rising expectations of customers, these
expenses are essential. Honda needs to retain its market share and leading position for which
it will need to invest in both the things. With growing rivalry in the automobile industry the
need for talented employees has also grown.

Conclusion:

Honda is one of the leading automobile brands in the global market. It has a large market
share in both Japan and the United States. However, Honda might need to focus upon the
China market to grow its sales there. Its light Honda Jet has also become a hit and was among
the best selling light jets of 2019 during the first half of the year. Honda motorcycles are
popular in the Asian markets. Honda’s focus on style, performance and competitive pricing
has helped it acquire a large market share in the Asian motorcycle market. For faster growth
Honda must focus upon technological innovation and invest in the latest technologies like AI,
autonomous driving technology and digitalization. As customers’ lifestyles have changed, so
have their expectations and demand. 

The global automobile market has entered a challenging phase in 2019. Demand and sales
have fallen compared to last year. However, the demand and sales of electric cars is growing
higher in 2019 and this trend is expected to continue in the coming years. Tesla’s sales in 2019
show that the popularity of electric cars has grown. Honda too must focus upon growing its

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lineup of electric vehicles and hybrids. This change has come somewhat abruptly and will
benefit the brands that have been investing more aggressively in electrified cars. Customer
experience should also be a top priority for Honda. Honda has a large product portfolio and
that gives the company some extra edge. However, it must not remain behind in the race for
technology. Investing in autonomous driving and electrical cars which help it retain its position
when new trends and technology are  taking mobility into a new era. 

Sources:
HONDA MOTORS Annual Report 2019.

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Abhijeet Pratap

Abhijeet has been blogging on educational topics and business research since
2016. He graduated with a Hons. in English literature from BRABU and an MBA
from the Asia-Pacific Institute of Management, New Delhi. He likes to blog and
share his knowledge and research in business management, marketing,
literature and other areas with his readers.

...

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