Honda Motor Co Ltd (ADR) (HMC), Toyota Motor Corporation (ADR) (TM): Can This Automaker Race Towards Its Goal?

Yes! Honda Motor Co Ltd (ADR) (NYSE:HMC) will be returning to Formula One again after a long absence. It will supply engines to its former F1 partner, McLaren Automotive. So racing fans can expect to witness the magic of the powerful Honda Motor Co Ltd (ADR) (NYSE:HMC) engines once again in 2015.

Now that Honda Motor Co Ltd (ADR) (NYSE:HMC) has delivered the good news to sports lovers, does it have some equally satisfying news for its investors? The company has certainly stepped up its performance in fiscal 2013, growing its sales by 24.3% and improving its EBIT by 90%. This comes after a horrible 2012, when it slumped on account of a Japanese earthquake and Thai floods. And now, Honda Motor Co Ltd (ADR) (NYSE:HMC) has set a steeper target for itself in fiscal 2014 aiming for revenue growth of 22.5% and a huge 59.5% increase in EBIT.

Let us look at some key drivers that will make this happen.

Good demand in North America

North America is Honda Motor Co Ltd (ADR) (NYSE:HMC)’s largest market, accounting for around 40% of sales. The company is witnessing good demand here. In fact, its May sales figures were quite a surprise for market experts. Edmunds.com had predicted Honda Motor Co Ltd (ADR) (NYSE:HMC)’s auto sales would increase by 1.7% y-o-y, but the company reported a much better 4.5% growth.

Honda Accord is witnessing good sales gains. Of course, gone are the days when the mid-size segment was completely ruled by the Toyota Motor Corporation (ADR) (NYSE:TM) Camry and Honda Accord, as both these cars have met their match in the Nissan Altima and Ford Motor Company (NYSE:F) Fusion.

But so far Accord still holds the second spot in the mid-size race, selling around 155,183 cars. This is a good 22.9% increase over the first five months of 2012. Camry is still doing well with 171,756 units sold, despite its 5.5% y-o-y decline. Altima holds the third spot with 140,883 units, a 4.1% increase over last year.

Meanwhile, demand for Honda CR-V trucks have picked up, with sales up 8.4% in May.

Honda is also trying to boost its Acura luxury division, which is witnessing a slowdown. The company has earmarked $1 billion to roll out new models for RLX, the MDX sport wagon, and the NSX super sports car. The NSX will carry a price tag of around $100,000.