Honda is on track to hit record sales this year, and makes no apologies for the conservative, retail-sales-focused strategy that has kept mainstream vehicles like the Accord and CR-V popular.
John Mendel, head of the American Honda Auto Division, said Tuesday that he will protect Honda customers and the value of their vehicles by spending less than the competition on incentives, keeping fleet sales in the single digits and not participating in the jump in sub-prime and long-term loans.
“We are not going to take the risk of long-term financing,” Mendel told reporters in a conference call. “We will miss out on those customers if we have to.” Honda will not chase market share, which he said can lead to poor business decisions.
Mendel justifies the strategy with the latest Polk and IHS Automotive retail registration data, which shows the Accord mid-size car and CR-V compact crossover have garnered record retail sales in the first half of the year with no signs of slowing down. The Accord, CR-V and Civic exceeded 300,000 sales in 2013 and are expected to do so again this year.
Profitable car and crossover sales are important for an automaker that does not have full-size pickups to rely on to bolster the bottom line.
Honda is also ramping up inventories of the new subcompact Fit in Mexico, and will add the HR-V crossover this winter. A new Pilot is due next year, and on the luxury side, Acura has a strong lineup of new cars and updated crossovers.
“The Honda brand isn’t even close to tapping its potential yet,” Mendel said. “And it’s all on the retail side,” which he believes is the most accurate market indicator.
“The CR-V is the right size in a hot segment,” said analyst Stephanie Brinley of IHS Automotive. “It has been there a long time, and people are comfortable with it. It is a really easy buy if you don’t want to do a lot of research or spend a lot of time, because out of the box it is expected to be a good vehicle.”
Mendel said Honda styling has been criticized as bland “all of our corporate lives. For the last 10 years, we’ve taken our shots on bland styling.” And while people won’t buy an ugly car, he thinks quality, durability and maintaining value are more important to buyers and explains Honda’s sales success.
“We’re not going to chase design trends. We are durable,” Mendel said. “We’re never going to make you look stupid from a customer perspective.”
“In times of stress or difficulty, our market grows like crazy. We are the safe bet,” Mendel said, pointing to data that shows the retail registrations accounted for 98 percent of all Accord registrations through June, according to Honda’s analysis of IHS Automotive new-vehicle registration data.
High loyalty rates and an industry back to historic sales levels mean Honda is on track to break its sales record, set in 2007.
Data from Maritz Research shows milllennials, which represent a pool of 80 million buyers born from about 1980 to 2000, want crossovers with a little more styling, such as the Ford Escape or Explorer, which jumped in buyer consideration in the annual New Vehicle Customer Study.
“Millennials are an important group of buyers in the industry today,” said Chris Travell, vice president, strategic consulting for Maritz Research, “and not just in terms of sheer size. They are also helping to refine the vehicle shopping and ownership experience.”
“The trend of millennials starting families comes at the same time Ford is updating or replacing nearly its entire product lineup,” said Amy Marentic, Ford global car and crossover marketing manager. “These fastest-growing segments – like small utilities – coincide with Ford’s product strengths.”
Honda’s Mendel said the Fit, Civic and Accord resonate with millennials.
The bigger picture is that a healthy auto industry has more models and more capacity today, making it more competitive than ever.
“Every car out there has a lot of capacity, capability, higher quality, better appeal, so it’s a highly competitive market – and we welcome it,” Mendel said. “But we won’t deviate from the strategy that has led to our retail sales.”