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No large car company is going to do well as the global recession deepens. But the one best positioned to move through the tough period is Honda (NYSE: HMC). It did not go through the global factory expansion that has stretched Toyota's (NYSE: TM) resources. It builds small, quality, fuel-efficient cars that have gained more and more market share in almost ever major country.
Results out of China say something about Honda's relative success. According toThe Wall Street Journal, "Chery Automobile Co., China's most successful independent producer and marketer of cars without a foreign partner, said January sales rose, and forecast a sales increase this year, while Honda Motor Co. said January car sales in China increased 17% from a year earlier." Total car sales dropped almost 8% in the world's most populous nation last month.
Based on data from 2008, most foreign car companies selling vehicles in China had drops in sales year-over-year. That makes Honda's performance all the more impressive. China is now the second largest car market in the world, after the U.S. The penetration of cars per household is obviously much lower than in America. In an economic recovery China vehicle sales ought to move back to double-digit growth. The Big Three may not have the financial resources to take full advantage of that, which makes Honda's position even better.
Which car company's shares are likely to do best over the next year? It would not be smart to bet against Honda.
Douglas A. McIntyre is an editor at 24/7 Wall St.
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