Back to top

Analyst Blog

Dongfeng Honda Automobile Co., the Chinese arm of Honda Motor Co., Ltd. (HMC - Analyst Report), is recalling all Siwei CR-V vehicles manufactured from Mar 2, 2010 to Aug 30, 2012. The recall is being made to fix a defective front shock absorber piston rod. According to the General Administration of Quality Supervision, Inspection and Quarantine, the defective rod can break in some cases, leading to safety issues.

Thus, Honda is recalling almost 408,000 SUVs. While product recalls are very common, this recall might hurt Honda as the company, like most Japanese automakers, is trying to regain its market share in China.

Last year, the feud between China and Japan over the ownership of some islands in the South China Sea, significantly affected the sales of Japanese cars in China. As China is the world’s largest automobile market and is growing at a rapid pace, all automakers are vying for a share in the market.

Other Japanese brands, including Toyota Motor Corp. (TM - Analyst Report) and Nissan Motor Co. (NSANY), also have a presence in China, along with American manufacturers like General Motors Company (GM - Analyst Report). The Japanese manufacturers witnessed a 17.6% year over year increase in sales in China in Jul 2013, according to the China Association of Auto Manufacturers. This is an improvement over 16.5% in June and is also higher than the overall market growth of 10.5% in China.

With the introduction of a stimulus package, including tax incentives for small cars, by the Beijing Government, China beat the U.S. as the largest auto market by sales volume in 2009.

However, the incentives were scrapped last year and the Beijing government imposed quotas on new car registrations in order to control traffic congestions. The scenario is expected to worsen as the Chinese government has increased the number of cities where it is curbing vehicle purchases to reduce greenhouse gases, as revealed by the China Association of Automobile Manufacturers. However, China still remains a key market for automobile manufacturers.

Honda currently carries a Zacks Rank #3 (Hold).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
SUPER MICRO… SMCI 27.00 +10.25%
CANADIAN SO… CSIQ 38.34 +8.18%
CENTURY ALU… CENX 26.97 +7.97%
WILLDAN GRO… WLDN 11.38 +5.86%
AROTECH COR… ARTX 3.78 +5.59%