Honda Motor Co. raised its forecast for full-year profit as demand for Vezel and XR-V sport utility models surged in China, the carmaker's second-largest market.
Net income will probably rise to ¥415 billion in the fiscal year ending March, more than the ¥390 billion forecast in May, according to a statement from the Tokyo-based automaker.
Honda boosted deliveries of the Vezel and XR-V models each by more than 50 percent, as carmakers selling in the world's biggest auto market benefited from a sales tax cut for vehicles with smaller engines. China's government is looking at extending the levy reduction set to expire this year, potentially helping Honda rebound from unprecedented recalls of Takata Corp. air bags.
"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."
While Honda also raised its forecast for operating profit this year to ¥650 billion, from ¥600 billion, it dialed back its projection for annual revenue. For the year, sales will probably fall to ¥13.4 trillion due to unfavorable foreign exchange rates.