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Honda's (HMC) China Venture to Recall 222,674 Accord Sedans

Zacks Equity Research

Honda Motor Co., Ltd.’s HMC China venture with Guangzhou Automobile Group Co. Ltd. is set to recall 222,674 Accord sedans in China, per Reuters. Recent complaints about the quality of the vehicle’s engine in social media led to this recall.

A problem arising from the intercooler of the vehicle’s 1.5T turbocharged engine was the reason behind this recall. Per the State Administration for Market Regulation of China, the engine lost its speed in some cases to guard the vehicle. In fact, some vehicle owners used social media ‘Weibo’ to showcase that the vehicles are losing speed.

Honda has been recalling vehicles frequently over the past few years. The Japan-based automaker is the largest customer of the faulty Takata airbags that can explode and shoot out metal fragments after a crash. In March 2019, the company announced to recall around 1 million older vehicles in the United States and Canada.

Notably, though total vehicle sales in China are witnessing a declining trend in recent months, Honda’s sales in the mainland have outperformed the overall market.

In the latest recall, The Guangzhou-based venture will install devices that raise the airflow rate at the engine intercooler to rectify the problem.

In the past six months, shares of Honda have underperformed the industry it belongs to. Shares of the company have fallen 11.4% compared with the industry’s 1.1% decline.

Zacks Rank & Stocks to Consider

Currently, Honda has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the auto space are Fox Factory Holding Corp FOXF, CarMax, Inc. KMX and Gentex Corporation GNTX, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Fox Factory has an expected long-term growth rate of 16.7%. In the past six months, shares of the company have rallied 22.9%.

CarMax has an expected long-term growth rate of 12.6%. In the past six months, shares of the company have moved up 36.9%.

Gentex has an expected long-term growth rate of 5%. In the past six months, shares of the company have returned 36.8%.

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