Automobiles and Motorcycles


Automobiles, or motor vehicles, are self-propelled machines that can carry a passenger or a load of goods. They can be of two, three, or four wheels. Cars are generally designed to carry a few passengers and can be easily converted to transport more cargo. Motorcycles, on the other hand, are usually designed for one person to ride on, but they can be equipped with sidecars.

The automobile’s first appearance was a bicycle-like contraption. Edward Butler developed a three-wheeler with a horizontal single-cylinder gasoline engine and a drive chain to the rear wheel. It had a rubber multi-hole mat floor, brass pedals, and a red dashboard. A similar machine was developed by Sylvester Howard Roper in 1867.

Automobiles are the most widely used forms of transportation in modern society. Vehicle ownership is increasing by 5 to 10 percent each year. There are also many different types of automobiles. Some are designed for light traffic and others are designed for heavy traffic. Depending on the type, an automobile can have up to five or more passengers.

During the early twentieth century, the American automobile industry was dominant. By the early 1940s, Ford, General Motors, and Chrysler had established themselves as the “Big Three.” After World War II, the automobile industry began to develop globally. In Europe, automobile production skyrocketed. Automotive manufacturing tradition in the United States helped make automobiles more affordable to middle-class families.

Although the Japanese automobile business has been struggling for decades, Honda has seen its earnings climb steadily. In the last five years, the company’s net cash balance has climbed to over $2,093 billion. This is unusually high for an auto manufacturer.

Despite its large exposure to the North American market, Honda has maintained a strong foothold in Latin America. Sales in this region have effectively doubled since FY3/2011. Management has stated that the markets in this region are maturing. However, the challenge remains in capturing new markets.

Honda will focus on expanding its presence in the Asia-Pacific region. It has an impressive presence in Thailand, sometimes referred to as the “Detroit of Asia”. Other Asian countries, such as Japan, Korea, and China have been developing rapidly. Its market share in these countries is nearly 75 percent.

The automotive segment faces some challenges in the future. Electrified vehicles are expected to negatively impact the sales mix. However, management is confident margins can improve over time. As a result, they are expected to increase their R&D spending, focusing on technologies to enhance the safety of Honda’s products and a possible carbon neutral vehicle.

The motorcycle segment is a key element of Honda’s business. With a relatively low ASP, Honda is well-positioned to take advantage of the emerging markets in India and Africa. Nevertheless, there are questions about the presence of Chinese brands in these markets. Also, the future of Indian manufacturers Baja and TVR is uncertain.

Honda is known for its high return on investment in the motorcycle business, and has a solid underlying balance sheet. However, its overall cost-heavy business is laggards compared to its peers. Even so, Honda has been able to offset its cost structure by achieving positive free cash flow for the last five years.