Market Insight: Honda still taking hard knocks

HONDA’S position at the bottom of Australia’s Top 10 sales table this year seems incongruous for a highly regarded brand stacked with strong, reputable nameplates – some of which, like Integra, Prelude, NSX and S2000, are albeit long gone – and which increased market share and sales throughout last decade to the point where it was one of the top five brands in the nation.

Honda trailed only the ‘Big 3’ (Toyota, Holden and Ford) and Mazda in 2006, with VFACTS figures showing it had an impressive 5.6 per cent share of the market with almost 55,000 sales, and was outselling Mitsubishi – despite it being a local manufacturer at that point – as well as Nissan and Hyundai.

The following year it reached another high point, breaking through the 60,000 sales barrier for the first time on the back of success stories such as the CR-V compact SUV (12,600+ units), its all-important Civic small car (17,600+), the Jazz light car (11,600+) and a dual Accord strategy that together accounted for 15,500 new registrations.

As we documented in Market Insight 12 months ago, Honda’s downturn since 2007 has been remarkable and, most worryingly for senior management, it has continued while the industry overall has recovered from the global financial crisis.

From top: Honda CR-Z, 2012 Civic sedan concept, Civic Si hatch, 2011 Accord Euro update, CR-V, Fit (Jazz) EV.

Even as late as the end of November last year, in boom times, Honda Australia was not expecting to finish the year worse off than in 2009, but that is what transpired, with the final figures coming in at just over 40,300 (down 2.6 per cent, or some 1000 units lower than the previous year) as Honda’s market share dropped below four per cent (to 3.9) for the first time in six years.

In the first two months of this year, Honda has fallen behind Subaru and Volkswagen and is clinging on to 10th place by just 700 units from a fired-up Suzuki. Indeed, Honda is now in serious danger of falling off the Top 10 table altogether as rival brands with big aspirations and fresh models – Suzuki and Kia to name two – come to the fore.

Honda recorded 2227 new registrations in January (down 25.9 per cent on the same month last year) and 2585 last month (down 16.7 per cent), which leaves it 21.2 per cent in arrears so far this year, with a share of just 3.1 per cent.

Of course, this accounts for only two months, but it is difficult to think of 2011 as being anything other than a make-or-break year for Honda, which blamed last year’s poor results on stock shortages and the continued slump in large-car sales.

The latter has rendered the Legend almost irrelevant (just 66 were sold last year) and has particularly hurt the larger of the two Accords.

Combined, the Accord twins returned only 9500 sales last year, while the once-dominant CR-V, which is suffering from the lack of a cheaper 2WD variant (not due until the next generation arrives in 2012), climbed back from a miserable 5100 sales in 2009 to around 7200.

Civic, too, is a shadow of its former sales self – Honda shifted 10,450 units last year, a quarter of the number Toyota managed with Corolla – with its problems ranging from no five-door hatch model available from Australian free-trade partner Thailand (which builds the sedan) to development delays of the new-generation model during the GFC.

The current ageing Civic is simply unlikely to recover lost ground before the more stylish redesigned model unveiled in Detroit in January turns up here late this year, despite the UK-sourced hatchback now being in the market at a more appealing $29,990.

In Australia, where five-door hatchbacks rule the roost, the entry level needs to be some $8000 below Honda’s current mark – down to around $21,990. But with engineering and production of the next-generation Civic hatch to remain in Europe at this stage, there is no solution to the problem in sight.

Meanwhile, in the light-car stakes, Suzuki’s all-new Swift almost outsold the Jazz two-to-one (1001 units to 575) last month.

Having walked away from its performance-car heritage in favour of a softer, greener image, Honda is banking on its new Insight hybrid and other petrol-electric models playing a major role in lifting it out of the doldrums as it works toward its publicly stated sales targets: 47,000 this year and a return to 60,000 by the end of 2013.

The CR-Z hybrid sports coupe comes in July, but hybrid versions of the Jazz and the redesigned Civic are not scheduled to arrive until 2012.

Together with the Insight, which is making few inroads with a mere 31 registrations in January and 90 last month (notwithstanding a multi-million-dollar advertising campaign), Honda expects hybrids to account for no less than 6000 annual sales – 10 per cent of its overall total – within three years.

The Insight is expected to attract a similar number of buyers as the UK-built Civic hatch – that is, a hoped-for 200 a month.

Whether or not Honda reaches its hybrid sales goals, the focus of attention will remain on its volume-selling conventional-engine models, most of which are continuing to experience downturns this year after poor performances in 2010 – a year in which the Australian subsidiary mercilessly slashed prices, added equipment and turned out a host of high-value special editions of key models.

There will doubtless be more of the same this year, with an updated Accord Euro one of the few new-model highlights (outside the new CR-Z and Civic sedan) on the launch pad.

Hit by recalls, hammered by its rivals, hurt by supply issues and facing further uncertainty in the wake of Japan’s earthquake and tsunami disaster, Honda looks to have a long, hard road ahead of it.