Honda (NYSE:HMC) may be known for its cars, but right now it's trucks -- yes, trucks -- that are powering Honda's profits.
Last week, Honda reported a 20% jump in second-quarter profits, thanks largely to strong sales of its truck models in major markets like the U.S. and China.
It was a little strange to hear the maker of the Accord and Civic sedans report big profits on truck sales. But we'd better get used to it: Honda said on Monday that its truck sales took another big leap in July.
Honda's "crossover" SUV formula is working very well
Honda's U.S. arm said on Monday that its U.S. sales of trucks rose 13.2% in July, helping the company to an overall 7.7% year-over-year gain.
To be clear, when Honda says "trucks," it (mostly) isn't talking about pickups. The company does sell a pickup, the Ridgeline, but most of its "truck" models come from its acclaimed car-based crossover SUVs and its Odyssey minivan.
Those Honda SUVs have done very well in 2015, and they continued to post gains in July. Honda's CR-V is now second only to the Accord in the brand's U.S. sales standings, and it's closing fast with an 11.4% increase in July. (Accord sales were down slightly.) Meanwhile, the small Fit-based HR-V, all-new this year, added nearly 6,000 additional sales as it continues to rapidly gain traction in the U.S. market.
Honda is also a player in the rapidly growing premium SUV space. Its recently refreshed midsize Acura RDX crossover gained over 29% in July, although its larger MDX lost ground on what Honda described as "inventory issues."
Honda's sedans continue to struggle, but Acura's are gaining ground
Like most of its rivals, Honda has struggled to post sales gains with its mainstream sedans. Low gas prices and buyers' increasing preference for the roominess and utility of car-based "crossover" SUVs have especially favored vehicles like the CR-V; but the price has been a tough slog for Honda's stalwart Accord and Civic sedans.
The upscale Acura sedans have fared better. The all-new compact ILX sedan posted a 31% year-over-year sales gain. And the new midsize TLX got off to a strong start, with over 3,500 sold in July. Combined, Acura's sedan sales were roughly double its results from a year ago.
Profit margins still need work, but current sales trends should help
Honda still has some big issues to work through. Unlike some of its rivals, which have ridden strong truck sales to fat profit margins of over 10% in North America, Honda's operating margin in the region was just 4.9% in the second quarter.
Still, Honda managed to raise its average transaction prices by almost 3%, to about $27,600, according to estimates from Kelley Blue Book. As long as it can keep costs -- and incentives -- under control, fatter profits seem within reach as the year goes on.