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Honda Quietly Shifts into Growth

2010 Honda Insight
Source: automobiles.honda.com
2010 Honda Insight

They aren't sexy. In fact, some might even call them boring.

But one thing that stands out about Honda cars, SUV's and minivans is their appeal to buyers who want reliability and fuel efficiency.

That formula has worked for years at Honda, and it's the reason the company is looking at stronger results for the remainder of this year.

Honda issued a more optimistic outlook after posting strong results for the fourth quarter. This year, Honda expects its net profit to jump 27%, thanks largely to stronger sales in Asia and North America. Considering the stronger Yen and higher raw material costs, Honda's forecast is one that will get a lot of attention.

What's driving Honda higher is the fact it consistently cranks out reliable and fuel-efficient cars. In fact, in announcing its fourth quarter results, Honda attributed the improvement to cost cutting and demand for hybrids and fuel-efficient cars. This year, Honda's sales in the U.S. are up 12.5%, driven in part by Accord sales surging more than 20%. While some of this can be attributed to the fact Honda models like the Accord and Civic have a track record of being in demand, there's another reason sales are up: Toyota's troubles.

When the Toyota recall crisis exploded in January and the company suspended sales of many of its most popular models, it was clear potential buyers would go across the street to check out Honda, Hyundai, and yes, to Ford . Research shows Toyota buyers have traditionally cross-shopped with Honda, so when Toyota stumbled it's not surprising many may have rotated over to Honda. That's a shift some believe will continue for a while.

If gas prices start to move higher later this year, as some analysts are predicting, Honda will be in the sweet spot of the market. Sure, its line-up of hybrids has yet to pose a serious challenge to Toyota's dominance, but it's still early in the hybrid game. If Honda can roll out a hybrid that steals the spotlight from the Toyota Prius, the Japanese automaker will have another weapon to win over buyers.

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