Honda’s small car dramas

HONDA’S upcoming Insight hybrid could become the Japanese brand’s most affordable small-segment hatchback in Australia for most of this decade, with confirmation this week that the next-generation Civic hatch will not be sourced from lower-cost countries such as Thailand or India.

With the axe hanging over the current-generation UK-sourced Civic Si five-door hatch and the three-door Type R continuing for the time being – despite Honda announcing last week that it will be phased out in much of Europe later this year due to CO2 emissions regulations – GoAuto has learned the redesigned hatch due in 2012 will continue to be built exclusively in the UK.

That will all but guarantee Honda Australia is forced to continue with the Thai-sourced Civic sedan as its volume-selling low-$20,000s small car, although as we’ve reported the Insight should arrive in November with a sub-$30,000 sticker price.

Company executives have confirmed to GoAuto in Thailand this week that the UK will continue to be the sole supplier of the Civic hatch, as it has been since the current eighth-generation model appeared in late 2005.

The decision is in line with Honda’s policy of building models close to their largest markets – and Europe easily accounts for the vast majority of Civic hatchback sales.

“We will continue to only build cars where the buyers are,” said one Honda source.

“There is just no market for the hatch … not in Thailand and certainly not in India.”

From top: Honda City, Honda Civic Si, Honda Jazz.

Honda Australia will stick with the Civic sedan sourced from Thailand when the ninth-generation model is announced sometime within the next two years, but the hatchback restrictions will likely prevent the company from accessing a large slice of the biggest vehicle segment in Australia for years to come.

Suggestions that Honda’s Thai plant in Ayutthaya or a Honda facility in India might have been under consideration to also produce the next Civic hatch were swiftly dismissed due to the fact that there is next to no demand for hatchbacks in most of Asia outside Australia and New Zealand.

It is understood that Honda Australia’s hand was forced some time ago when the company’s senior executive board in Japan gave the Honda site in the UK the green light to again be the sole supplier of the Civic hatch.

Of course, the company could introduce the next-gen Civic hatch when it becomes available, but it will struggle to keep the base price under $30,000 due to fluctuating exchange rates and high transportation costs.

Apart from the light-sized Jazz, Honda has not offered an affordable hatch in Australia since the last-generation Civic bit the dust in January 2006 – the last time that Japan built a Civic five-door – but has had modest success with the Type R three-door from 2007.

Since May last year, the Si five-door has been available in limited numbers, but its near-$40,000 pricetag heavily curtailed sales.

The Si price was unexpectedly high because of the freefalling Australian dollar against the Euro during the height of the global financial crisis, during which it plummeted almost 40 per cent. An expensive snag in trying to meet the necessary Australian Design Rules regulations did not help the Civic Si’s bottom line at the time either.

Honda recognises that its Australian sales are hurting because it has no small hatch and admits that buyers do not consider the second-generation Jazz as large enough to take on the big-selling models such as the Toyota Corolla, Mazda3 and Hyundai i30, despite critical acclaim.

Therefore its task ahead is to successfully position the petrol-electric Insight as an alternative not just to the Toyota Prius but more mainstream models such as diesel versions of the Volkswagen Golf.

Should Honda Australia succeed in negotiating a sub-$30,000 opening salvo for the Insight with its Japanese parent company, high equipment levels should help drive the Insight’s appeal beyond buyers attracted to its obvious eco credentials, although Honda this week refused to discuss the hybrid’s pricing or positioning plans.

However, a spokesman for the company did say that hybrids of many shapes and sizes – including next year’s CR-Z coupe, Honda’s forthcoming plug-in hybrid and, potentially, a hybrid version of the Jazz - would play a crucial role in the future of Honda Australia.

Cheap Insight or not, the introduction of the Australian-built Holden Cruze next year and the likelihood that the next-generation Ford Focus will be sourced for Australia out of Thailand from 2012 will put even greater pressure on Honda to find a solution to its Civic hatch problem.

“We are in discussions in Japan about looking at other viable options,” another Honda source said.

“But there is nothing that is currently available at the moment for Australia.”