Can Honda's New Accord Beat the Camry?

Honda aims to sell more than 400,000 of its new Accords in 2008. But it will be hard to reach that goal without cutting prices—and profits

by David Welch

Honda isn't the kind of company known for making Joe Namath-like projections. But the normally understated Japanese automaker has a gutsy goal for the new 2008 Accord, which hits showrooms in September: Honda wants to sell more than 400,000 of them in 2008.

That takes square aim at the Toyota (TM) Camry's family-car sales crown. If Honda Motor (HMC) hits its target of selling 430,000 cars, which some in the company think is possible, the Accord would post a 23% gain and overtake Camry's reign as the best-selling family car.

Defying Industry Wisdom

Honda's ambitions are ambitious, especially at a time when buyers are more interested in smaller crossover vehicles than either gas-chugging large sport-utility vehicles or vanilla sedans, says Eric Noble, president of Car Lab, an auto industry consulting firm in Santa Ana, Calif. Selling so many Accords also runs afoul of industry wisdom that selling hundreds of thousands of the same model is a thing of the past. Indeed, besides the Camry, only Ford Motor's (F) F-series and Chevrolet's Silverado pickups sold more than 400,000 models last year.

Why is Honda so optimistic? The new Accord is more boldly styled than ever before. And the new car is bigger, faster, and slightly more fuel-efficient than the current car. Says Gary Robinson, Honda's product planner for the Accord: "The idea that you can't sell a model in big numbers is overstated. The Camry and Accord defy that rule."

How They Stack Up

One of Honda's bragging points, Robinson says, is that the new Accord has more horsepower than it has ever had at 268 hp from its V6 engine. Even with the power boost, the Accord will get 29 miles per gallon on the highway, about 3 mpg more than the current car. Honda will also offer an even more efficient four-cylinder motor.

The V6 is so efficient, it makes one wonder why anyone would bother with the four-cylinder Accord. The smaller engine gets 31 mpg on the highway and about 26 mpg combined. The V6 will get about 24 mpg in city and highway efficiency.

The Accord's interior is more luxurious, too. Robinson says Honda took cues from the company's Acura RL flagship luxury sedan. The rear passengers will have as much legroom as Honda offers in the Pilot, its largest SUV.

Robinson says the price will be roughly the same as the current Accord. Honda thinks that it's offering so much value that sales could reach as high as 430,000 cars a year. That would beat Camry's sales, which were 417,000 last year.

Fresh Competition

One factor in its favor is that the Accord's chief rival, the Camry, won't get a full redesign until 2011, says Rebecca Lindland, an analyst with Boston-based research group Global Insight. Still, Lindland says, surpassing 400,000 units will be very tough.

Only General Motors (GM), with its new Malibu this fall, and Mazda's new 6 sedan will be completely fresh competition.

For GM's part, company Vice Chairman Robert Lutz says that the Malibu will be the automaker's best shot at winning back passenger-car buyers who have flocked to Japanese cars over the past two decades. "The Malibu is as good a midsize car as we know how to build," Lutz says. "Can we convince satisfied Camry and Accord buyers? We think we can."

Selling Without Slashing

Since Accord buyers mostly cross-shop the Camry, it would seem Honda would be able to steal plenty of buyers. But that's not the real challenge. Car Lab's Noble says the real test will be getting the big jump in sales without cutting prices.

Just in the past year, incentives on midsize cars—even leaders like Camry and Accord—have ballooned. In June, Honda spent more than $2,000 a car to push the Accord, more than double the incentive levels from a year before. Last month, Honda pulled back on deals and spent $1,400 per car on incentives. Toyota and Nissan (NSANY) are both spending more on their midsize cars, too. Even with the come-ons, midsize car sales are down 7% this year as crossovers continue to capture the imagination of consumers.

"That will keep Honda peddling uphill in their efforts to sell 400,000 Accords," Noble says. "They can get volume, but they'll have to cut prices."

Welch is BusinessWeek's Detroit bureau chief.