Honda Motor Co and Renault joined their rivals in reporting strong results for the quarter to the end of June, as the auto industry faces growing concerns over slowing demand in the United States, China and Europe.
The biggest risk in the current business year is probably the overall slowing of the U.S. economy, said Tomomi Yamashita, a fund manager at Shinkin Asset Management in Tokyo.
Carmakers are also fearful that austerity measures in Europe including tax hikes in some markets will slow the recovery, leading Renault to stick to its goal for the year.
Honda raised its full-year forecasts on Friday after posting a record quarterly net profit on Friday, while Renault swung to first half profit but warned of an uncertain outlook in Europe.
Renault warned that pricing pressure would likely increase in the second half as the business environment remained uncertain, while raw material price rises would have a negative impact of up to 300 million euros in that period.
In an uncertain environment in the second half of 2010, the group will continue to focus on its key target of generating positive free cash flow for the full year, Renault said.
Renault's half-year sales rose 23 percent like-for-like to 19.67 billion euros ($25.7 billion), while recurring operating profit reached 780 million euros, or 4 percent of sales.
Renault's full-year target is built on the safe side, Chief Operating Officer Patrick Pelata told analysts on a conference call.
COMFORTABLE WITH JULY SALES
While comfortable with third-quarter sales so far in Europe, Pelata said there was limited ability to predict the fourth quarter thanks to a high level of uncertainty in the region.
He said he expected to see a double-digit percentage dip in July European car sales, while Renault's own sales should be down 5 to 6 percent in the region.
Car sales for July in France, Italy and Belgium, as well as detailed figures for Spain, will be published on Monday.
Pelata said sales van sales, which were not boosted by incentives should show a regular but slow recovery.
Pelata said margins at Dacia, Renault's entry-level Dacia brand, which includes Logan models and the new Duster 4x4, were improving continuously.
They were good before the crisis and relatively to the rest of Renault they are better, he said.
Bernstein analysts wrote in a note that while Renault has a realistic product strategy to cope with an age of austerity and is well placed in emerging markets, it is reluctant to make precise second-half forecasts.
The analysts said they expected more specific guidance in the autumn.
The stock is probably in limbo until that point, they said.
By 1209 GMT, Renault shares were up 1.6 percent to 34.19 euros, outperforming the STOXX Europe 600 Autos index, which was down 0.5 percent.
Europe's biggest carmaker Volkswagen said on Thursday the dynamic growth it saw in the first half would not continue undiminished.
On Friday, the company said its premium brand Audi had lost its claim to being the sole cash contributor in the group.
Also reporting strong margins was French tyre maker Michelin , which said it was aiming for an operating margin close to 9 percent in 2010 as the rebound in tyre markets helped it post a record first-half operating margin.
Continental and Pirelli reported robust first half figures on Thursday.
HONDA FORECASTS CONSERVATIVE?
Renault partner Nissan Motor Co, on Thursday reported its strongest quarterly operating profit in over two years, but also retained its cautious guidance.
Honda, Japan's No.2 automaker and the maker of the Accord and Civic cars, reported a nine-fold jump in quarterly operating profit to 234.4 billion yen ($2.7 billion), beating the average 138.3 billion estimated by six analysts surveyed by Reuters.
Honda lifted its net profit forecast to 455 billion yen from 340 billion yen but undershooting a consensus of 484 billion yen from a survey of 19 analysts by Thomson Reuters I/B/E/S.
Further strengthening in the yen is a cloud on the horizon for Japanese automakers, with the dollar hitting an eight-month low below 86.27 yen on Friday.
With the outlook for demand in developed markets shaky, automakers are looking to beef up their business in emerging markets such as India and Brazil, where cheaper cars dominate.
In terms of emerging markets like Southeast Asia and Brazil, I think they've (Honda) got a good foot in the door, said Andrew Phillips, auto analyst at BNP Paribas Securities in Tokyo.
Honda shares ended 0.3 percent lower ahead of the results.
Japan's Mazda Motor swung to a first-quarter operating profit of 6.4 billion yen from a loss of 28 billion yen a year earlier, and kept its annual profit outlook.
In South Korea, Kia Motors posted a 61 percent rose quarterly net profit, beating estimates as it enjoyed brisk sales of newly launched models.
(Additional reporting by Elaine Lies, Benjamin Shatil and Edwina Gibbs in TOKYO, Cheon Jong-woo in SEOUL, and Gilles Guillaume in PARIS; Editing by Lincoln Feast and Karen Foster)
($1=.7648 Euro=86.77 yen)