Although Honda managed to surpass market estimates for its quarterly earnings, the company did lower both its annual profit and global car sales forecats in the face of a disintegrating marketplace and the high price of materials.

In figures released on Friday, July 25, Honda, which is Japan's second largest automotive manufacturer and the world leader in motorcycle production, posted an increase of 8 percent for the last quarter.

The company faces challenges ahead, however, as consumer preference shifts away from large, gas guzzling trucks and SUVs. Honda's inventory of fuel-efficient models like the Civic is failing to meet with demand, leading the carmaker to predict sales 1.4 percent lower in the U.S., a figure equaling 1.745 million vehicles.

The chief portfolio manager at Daiwa SB Investments, Koichi Ogawa, quoted in a report by Automotive News said, "The situation looks tougher over the whole year, what with the lower forecast. Usually you'd think they might revise their forecast upwards, but things over the short term probably look pretty tough."

For April-June, Honda's operating profit excluding earnings in China fell 0.2% despite a 16-yen decline in the dollar and the mounting prices for steel, platinum, and other necessary raw materials. The net profit was recorded as $1.67 billion, well ahead of the predicted 19% fall in a poll of brokerage house forecasts.