Did Tesla's Win Send Honda Lower Today?


Honda Motor started off the new quarter on a sour note, falling nearly 4% as of 12:35 p.m. EDT. Without any obvious company-specific news to justify the move, there are two natural places to look for explanations: the broader Japanese stock market and Honda's competitors.

Honda definitely suffered partly due to the weakness in Japan on the first day of its new fiscal year, as the Nikkei fell more than 2% and broader measures of the Japanese stock market fell even more dramatically. Despite some favorable news on business sentiment, Japanese investors have enjoyed an even better first quarter than their U.S. counterparts, and after a nearly 17% rise for the Nikkei so far in 2013, a pullback doesn't seem out of the ordinary.

Yet today's news from Tesla Motors that it expects to report a profit when it releases first-quarter earnings results has to leave Honda investors feeling left out. Even as Tesla's Model S electric vehicle has roared to great success, Honda has had to deal with multiple recalls of already released car models this year. Even among conventional automakers, Toyota and Ford have regained much of their past glory, with Toyota retaking the total-sales crown and dominating the hybrid niche with its Prius, while Ford continues to move forward with its EcoBoost engines. We just haven't heard that much from Honda on the innovation front lately, and without apparent forward motion, it's hard to be excited about the company.

Finally, another concern for Honda is today's big rise in the value of the Japanese yen compared to the U.S. dollar. Much of the rise in Japan's stock market has come from a declining yen, which bolsters prospects for major exporters like Honda. If the yen reverses its recent weakness and starts rising, then it will pose a headwind for Honda and give U.S. automakers even more competitive advantages against the company.

For Honda to recover, it needs to reawaken its competitive spirit. With other automakers in the passing lane, Honda risks being left in the dust if it doesn't return to the innovations that made it a household name in the U.S. and around the world.

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The article Did Tesla's Win Send Honda Lower Today? originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Ford and Tesla Motors. The Motley Fool owns shares of Ford and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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