Honda has posted a betterthan-expected 30 per cent rise in quarterly net earnings, powered by strong North American sales.
The company's fuel-efficient cars are revving up sales in the United States as petrol prices now average $3 (£1.60) a gallon in the world's biggest car market.
That has prompted more buyers to opt for saloons against the higher consumption sport utility vehicles particularly on offer from General Motors and Ford.
Honda - Japan's third largest car maker - is also taking fuel economy to the skies, with plans to team up with Piper Aircraft to sell a small, fuel-efficient jet in the US market.
Koichi Ogawa, chief portfolio manager, with Daiwa SB Investments said: "Higher oil prices, higher gasoline prices have been working very much in the favour of Japan's auto makers. The desire for more f uel-efficient cars has increased worldwide."
But Honda's executive vice-president, Satoshi Aoki, said higher raw materials costs - from steel to rubber - exceeded cost cuts, slashing about per cent off quarterly operating profit.
April to June net profit at Honda, also the world's biggest motorcycle maker, rose to £668 million - £514 million a year earlier.
The company maintained its full-year net profit forecast at £231.6 million, but lifted its revenue forecast slightly to £49.56 billion from £49.10 billion.
The profit would be down on last year when Honda booked big extraordinary gains related to pension funds.
Mr Aoki said Honda was not in talks with materials sup-pliers to pay more for steel and other metals, and it wanted to keep car prices steady.
"It is not realistic to pass on the rising price of materials to consumers in these market conditions," he said.
Honda's Indian affiliate earlier this month warned of rising raw materials costs when it reported a lower-than-expected rise in quarterly profit.
Honda, which does not make truck-based SUVs or pickups, is struggling to build enough of its new Civic sedans, and is seeing healthy demand for its new Fit subcompact and CR-V crossover.
Honda, valued at more than £30.75 billion, maintained its global car sales forecast at 3.72 million units for the year to next March.
It expects to sell 1.77 million cars in North America, up from a previous forecast for 1.76 million, but revised down its forecast for Asia, excluding Japan, to 675,000 units from 695,000.
Rival Toyota is expected report strong profit growth next week, as its overseas sales expand.
However, Nissan posted a worse-than-expected 26 per cent drop in operating profit this week as sales dipped amid a lack of new models.
Toyota's mini-vehicle unit, Daihatsu. earlier posted an 8.3 per cent rise in quarterly operating profit as it sold more cars both at home and abroad, though profits grew less than a 22 per cent jump in revenue as capital spending and costs ballooned.
Honda's first-quarter operating profit, which excludes earnings from joint ventures in China and some other Asian operations, rose 19.4 per cent to £942 million.