Two of Honda’s (NYSE:HMC) SUVs, the CR-V and HR-V, for model years 2018–2022, are being investigated by the National Highway Traffic Safety Administration (NHTSA) on reports that the vehicle loses power when driven at high speed. The recent probe adds to the list of car-safety investigations being conducted on other Honda models.
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Drivers reported that these vehicles are also experiencing differential seal leaks, which lead to a rear differential lockup. This is ultimately causing the driveshaft, a core component of the vehicle’s drivetrain, to rupture while the vehicle is moving.
If NHTSA is able to accumulate enough evidence of safety issues from this investigation, it would recall about 1.72 million Honda SUVs.
Some of the other Honda vehicles have also raised safety concerns among their users. Recently, Honda had to recall the 2017–2019 model year Ridgeline pickup trucks on findings that usage of the tailgate caused a wiring harness, due to which the rearview camera fell. Also earlier in 2022, defects in the automatic emergency braking systems of Honda’s CR-V SUVs and Accord sedans were reported.
Should You Consider Honda Stock?
Shares of Honda have declined 7.4% and 18% over the past six months and the past year, respectively. Honda’s performance in 2022 has been marred by persistent supply-chain disruptions. Moreover, in October, the company announced plans to cut down car production by 40% at two of its Japanese plants, citing supply chain issues as a key reason.
Nevertheless, Honda has been building a strong presence in the EV segment, which might bode well in the long term.
Currently, Honda stock seems to be undervalued. It has a P/S ratio of 0.35x, reflecting a 98.6% discount from its five-year average of 26.58x. The discounted valuation presents a great buying opportunity for HMC.
