Honda Motor, Japan’s second-largest automaker, announced a robust 78% increase in its quarterly profit on Wednesday, fueled by a surge in sales, particularly in the North American market, and the advantageous impact of a weaker yen.

For the three months ending in June, Honda’s operating profit soared to 394.4 billion yen ($2.76 billion), surpassing market expectations and outperforming the average estimate of 324.74 billion yen provided by a poll of 10 analysts conducted by Refinitiv.

This remarkable gain starkly contrasts the 222.2 billion yen profit recorded during the same period in the preceding year.

The bolstering of Honda’s financials is notably attributed to heightened sales, with a substantial 44.7% year-on-year surge to 347,000 units in the pivotal U.S. market. This significant uptick reflects the easing of post-pandemic disruptions in parts and semiconductor supply chains, a challenge the entire automotive industry has grappled with.

In marked contrast, Honda experienced a substantial 5% decline in sales in the Chinese market, reporting 309,000 vehicles sold during the quarter. This decline is attributed to escalating domestic competition and a rapid transition towards electric vehicles, signaling a profound shift in the world’s largest automobile market landscape.

A Honda official remarked that business conditions in China have deteriorated compared to the company’s initial projection of selling 1.4 million vehicles for the entire year. The ongoing global semiconductor shortage has continued to impose restrictions on Honda’s operations, underscoring the complexities and vulnerabilities within the automotive supply chain.

As a response to these challenges, Honda is contemplating strategic measures, including exploring alternate regions for part distribution and manufacturing to mitigate the impact of semiconductor-related disruptions.

The company’s outlook for the remainder of the fiscal year remains steadfast, with Honda maintaining its forecast of achieving a 1.0 trillion yen operating profit. This projection is slightly below the average forecast of 1.117 trillion yen put forth by 22 analysts.

However, Honda remains cautiously optimistic, intending to evaluate the need for an updated full-year outlook as part of its second-quarter results announcement, anticipated to be made around the onset of November.

A critical factor that could influence the future course of Honda’s financial performance is the fluctuation of the yen’s strength against other currencies. The company’s official indicated that this factor will be weighed alongside other considerations when determining whether to revise the company’s outlook for the remainder of the fiscal year.

In summary, Honda’s robust quarterly performance, driven by buoyant North American sales and currency dynamics, exemplifies the resilience and adaptability of the automotive industry amidst a challenging global landscape.

The company’s strategic responses to market fluctuations, including the ongoing semiconductor shortage and evolving consumer preferences, underscore its commitment to navigating these complexities while sustaining growth and innovation.