Stock market today: S&P 500 rides Apple-led tech rally to close higher
On Tuesday, Morgan Stanley (NYSE:MS) provided insights on a report that Honda Motor (NYSE:HMC), a prominent automotive manufacturer with a $44.53 billion market cap and strong financial health according to InvestingPro analysis, may start procuring hybrid electric vehicle (HEV) batteries from Toyota Motor (NYSE:TM) in the United States. According to a March 17 article by the Nikkei Shimbun, Honda is expected to source approximately 400,000 batteries for its entire planned HEV sales volume in the U.S. for the fiscal year ending March 2026. This move would mark a shift from Honda’s previous practice of importing HEV batteries from Japan and China.
The procurement from Toyota’s North Carolina facility could allow Honda to bypass tariffs, potentially lowering costs for the company. Neither Honda nor Toyota has officially confirmed any such agreement. Morgan Stanley analysts view the potential deal as mutually beneficial, suggesting it could reduce Honda’s HEV battery procurement expenses, although the exact supply price from Toyota remains undisclosed. With Honda’s impressive 12.25% revenue growth over the last twelve months and strong cash flow coverage, the company appears well-positioned to invest in such strategic initiatives.
The analysts believe that the arrangement could also be advantageous for Toyota by increasing the capacity utilization of its North Carolina plant’s HEV battery production and reducing investment risks. This is particularly relevant given the current uncertainty surrounding the demand for battery electric vehicles (BEVs) in North America.
Toyota’s investment in the North Carolina plant amounts to approximately $14 billion. The facility is designed to manufacture batteries for HEVs, plug-in hybrid electric vehicles (PHEVs), and BEVs, with plans to commence shipping HEV batteries from April 2025. The potential collaboration between Honda and Toyota could signify a strategic partnership within the automotive industry, leveraging shared resources to enhance both companies’ positions in the growing HEV market in the U.S. Trading at an attractive P/E ratio of 6.93 and currently undervalued according to InvestingPro Fair Value analysis, Honda presents an interesting opportunity for investors looking to capitalize on the evolving automotive landscape. For detailed insights and access to comprehensive analysis of Honda and 1,400+ other stocks, explore the full range of tools and research reports available on InvestingPro.
In other recent news, Honda and Nissan (OTC:NSANY) have officially canceled their planned merger, which was announced less than two months ago. The merger talks halted after Honda proposed making Nissan a subsidiary, a move that did not align with Nissan’s board’s preferences. Despite the cancellation, both companies intend to continue their collaboration on auto technology. Meanwhile, UBS has upgraded Honda’s stock rating from Sell to Neutral, following a 30% drop in its share price since March 2024. The analyst from UBS, Kohei Takahashi, adjusted the earnings per share projections for Honda, reducing them by approximately 10% for the fiscal year ending in March 2025 due to higher product-quality costs and losses from battery electric vehicle operations. In another development, IONNA, a joint venture involving Honda, has moved to a full-scale national release, adding over 1,000 charging bays across the United States. This expansion includes over 100 contracted sites and represents a significant investment in American jobs and manufacturing. IONNA’s new headquarters and customer experience lab in Durham, North Carolina, will serve as a hub for ongoing testing and innovation.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.