Bloomberg News

Honda Hopes New Acura ILX Helps Keep Gen-Y Out of Lexus, BMW

December 14, 2011

(Updates with closing ADR price in 14th paragraph.)

Dec. 12 (Bloomberg) -- Honda Motor Co., seeking to revive its Acura luxury brand, is introducing a sedan intended for younger buyers unable to afford higher-end marques. It’s part of an effort to improve Acura’s image with new models.

The compact ILX is aimed at “Generation-Y” drivers who are turning 30, Honda said at a briefing in Las Vegas this month. The sedan will start “well under $30,000” when it goes on sale in early 2012, and will be shown next month at the Detroit auto show, said Vicki Poponi, assistant vice president for product planning at Honda’s U.S. unit.

“The brand is in trouble,” said Jessica Caldwell, an analyst for researcher Edmunds.com. “The consensus for many of the current models is the vehicles just look bland. They have to do something to capture peoples’ emotions with styling.”

Acura, like the Honda brand, is struggling this year from reduced production triggered by natural disasters and a model line that hasn’t drawn as much attention as those of Volkswagen AG’s Audi, Bayerische Motoren Werke AG’s BMW and Daimler AG’s Mercedes-Benz. Acura sales slid 6.7 percent through November, compared with gains of 15 percent for Audi, 12 percent for BMW and 12 percent for Mercedes’ luxury models.

With its new models Tokyo-based Honda plans to tout Acura’s lineup as “smart luxury” vehicles that combine fuel efficiency, driving performance and value for money.

Honda also will show its revamped Accord coupe in Detroit next month, the company said on its website. Both the coupe and a new sedan go on sale in late 2012, the company said, without elaborating.

Gen-Y Emphasis

Sales for Acura will rise in 2012, buoyed by the ILX and a revamped RDX compact utility vehicle that’s also to be shown in Detroit in January, said John Mendel, Honda’s executive vice president of U.S. sales.

Honda expects to sell 40,000 ILX sedans annually. Acura brand sales totaled 110,170 this year through November. Mendel declined to provide Acura’s volume goal for next year.

While baby boomers account for the majority of luxury sales, Acura is preparing for their children, who are entering the auto market, said Michael Accavitti, Honda’s vice president of U.S. marketing. The group, born since about 1980, covers as many as 80 million people, he said.

“Gen-Y consumers aspire to luxury still, but they need some help getting there,” he said. “They are projected to be the first generation in the modern era to earn less than their parents.”

Powertrain Options

The ILX will be available with three powertrain options: a 2-liter engine with an automatic transmission; a sportier 2.4- liter, manual transmission model; and a hybrid version with a 1.5-liter engine, Poponi said. The ILX will be built at Honda’s Greensburg, Indiana, plant, which makes Civic compacts.

The hybrid version will be Honda’s first gasoline-electric auto built in North America, the company said today.

The revamped RDX also goes on sale next year, receiving a new V-6 engine in place of its current turbocharged 4-cylinder model. The new version will have both higher horsepower than the current RDX and “much improved” fuel economy, Poponi said.

Honda’s American depositary receipts fell 1.7 percent to $31.19 at the close in New York.

NSX’s Return

Acura also plans other, more expensive models as it revamps its lineup.

A concept version of the NSX, Acura’s two-seat supercar that left the line five years ago, will also be shown in Detroit. A concept version of the RL, Acura’s current top-end sedan, will be shown in New York in April, Poponi said.

The mid-engine NSX is to be the brand’s “halo” model, equipped with a new “sport hybrid all-wheel-drive” system for high-performance driving and fuel-efficiency, said Gary Evert, division leader for Acura research and development.

The NSX should go on sale “within three years” and probably can’t be sold for “less than $100,000,” Tetsuo Iwamura, Honda’s chief operating officer for North America, said in an interview in Las Vegas, without elaborating.

“It’s definitely never a bad thing for a brand to have a high-dollar sports car, but the critical thing is RL,” said Ed Kim, industry analyst for AutoPacific Inc. in Tustin, California. “Acura has never achieved the status of the other Japanese luxury brands, mainly given the lack of a truly premium sedan.”

Roomier RL

The current RL, starting at about $48,000, isn’t competitive with rival luxury sedans because “it’s grossly undersized for the segment,” lacking the roomy back seat expected by buyers of BMW’s 7-Series and Toyota Motor Corp.’s Lexus LS, Kim said.

That will change with the new RL, which will go from having “worst-in-class legroom to the best-in-class,” Poponi said. The new version will have BMW “7-Series cabin space, with the agility of a 5-Series,” she said.

After its 1986 start as the first premium Japanese auto line, Acura grew rapidly on U.S. demand for entry-level Integra sedans and midsize Legend sedans.

Acura has been on a “wandering road” since the 1990s, Jeff Conrad, the brand’s manager, said in Las Vegas. That’s the result of “inconsistent” product introductions, he said.

Sales peaked in 2005 at 209,610 on demand for Acura’s MDX sport-utility vehicle and midsize TL sedan.

“Acura is almost restarting themselves back to square one, and that’s not a bad thing” said Edmunds’s Caldwell. “But at the end of the day, styling is also critical, so if it’s not a nice-looking car, no one is going to buy it.”

--Editors: Bill Koenig, John Lear

To contact the reporter on this story: Alan Ohnsman in Las Vegas at aohnsman@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net


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