International Trucks

The carmaker’s CEO wants to boost profits with a new, economical, 2009 hybrid—and with emerging market sales to offset weakness in Japan

Considering the environment for auto sales in Honda’s (HMC) two largest markets, Japan and North America, company chief Takeo Fukui looked remarkably relaxed as he delivered his outlook for the year ahead in Tokyo Dec. 19. It didn’t take long to understand why. During the address in Tokyo’s Shinagawa district, a confident Fukui predicted another year of overall expansion at the automaker in 2008, including a 3% increase in U.S. auto sales to 1.59 million vehicles despite concerns about the sub-prime crisis and stubbornly high fuel prices. He also predicted spectacular growth in several other key markets.

And in another sign of the Tokyo-based automaker’s burgeoning strength, Fukui also promised to give Toyota a tougher run for its money in the battle for eco-supremacy in the years ahead. Honda was an early mover in hybrids. But so far it hasn’t been able to benefit with a breakthrough like Toyota’s Prius, which dominates the hybrid sector. For instance, Toyota had 79% of hybrid sales in the U.S. in November, compared to just 10% for Honda, the No. 2 hybrid maker. The Prius alone accounted for 50% of all hybrid sales in the U.S. last month.

That’s why Fukui says that the battle is only now beginning. According to the Honda chief executive, the last decade was just the first phase for hybrids, a time when automakers focused on marketing a green image. The next phase, he argues, will focus on improving the economics of buying a hybrid. “The price needs to be reasonable and fuel efficiency higher so the [premium] the consumer pays [for a hybrid car] can be returned in a short period of time,” he says.