Bloomberg News

Honda Says Civic Has ‘Ammunition’ to Hang On as Top Compact Car

March 13, 2012

A Honda Civic at the Geneva International Motor Show in Switzerland March 5, 2012. Photographer: Chris Ratcliffe/Bloomberg

A Honda Civic at the Geneva International Motor Show in Switzerland March 5, 2012. Photographer: Chris Ratcliffe/Bloomberg

Honda Motor Co. (7267)’s Civic, stung by critical reviews and tight U.S. supply in 2011, has outsold rival small cars and the company has enough “ammunition” to hold the spot, an executive said.

U.S. sales of Civic sedans and coupes rose 45 percent to 48,970 in the year’s first two months, ahead of Toyota Motor Corp. (7203)’s Corolla, a perennial challenger, and General Motors Co. (GM)’s Cruze. After supply disruptions last year, Honda now has enough North American capacity to make Civic the top-selling compact, even if that isn’t a target, said Tetsuo Iwamura, chief operating officer for North America.

“When competitors shoot at the Civic, we’ll have enough ammunition to shoot back,” Iwamura said in an interview this week at Honda’s U.S. headquarters in Torrance, California. “We don’t talk about No. 1 as a goal. Always we think about having very good acceptance and high customer satisfaction.”

The car that’s been the core of Honda’s U.S. business since 1973 hasn’t led compact sales since 2002. Civic trailed both Corolla and Cruze last year, according to Autodata Corp., a Woodcliff Lake, New Jersey researcher. A year after an earthquake and tsunami damaged Tokyo-based Honda’s parts supply base and engineering center in Japan, the carmaker has ratcheted up North American output of the model 69 percent to regain sales in the U.S., its biggest source of revenue.

Honda has gained 32 percent in Tokyo trading this year, recovering most of the drop last year, when the stock fell 27 percent. It last closed at 3,100 yen.

Output Increased

Honda made 84,678 Civics at plants in Canada and Indiana in the first months of the year, up from 50,056 in the same period a year ago. Production of all Honda and Acura cars and light trucks in North America jumped 36 percent to a record 301,564, according to the company.

Civic sales fell 15 percent last year to 221,235, the lowest since 1992. Along with parts-related production delays, the 2012 Civic LX sedan failed to receive the “recommended” status its predecessors had from Consumer Reports last August. The magazine faulted the car for a decline in interior quality, choppier ride and road noise.

Higher U.S. gasoline prices are benefiting Civic, and should buoy demand for at least another four months, said Jesse Toprak, industry analyst for TrueCar.com.

“It’s got a pretty good chance of being No. 1 this year, owing to the availability and the price point,” said Toprak, who is based in Santa Monica, California. “They are a bit lucky that the fuel prices are rising now as Civic continues to be viewed generally as more gas-efficient, and a safe choice.”

Fuel Price

The average price for a gallon of regular unleaded gasoline has increased 16 percent this year to $3.81 as of March 12, according to AAA, the largest U.S. motorist group. The Civic coupe has a starting price of $15,605 while the sedan’s price starts at $15,805, according to researcher Edmunds.com.

The outlook for Civic beyond July, when fuel prices may ease, will depend on updates of the car Honda plans to make to address some criticisms and competing models including Hyundai Motor Co. (005380)’s Elantra, Toprak said.

“Hyundai, in particular, has shown that it has the ability to replicate the kind of success seen with Honda and Toyota a generation ago,” he said.

Even with some unfavorable reviews for the current Civic, the car continues to attract the buyers competitors seek, said Alexander Edwards, president of the automotive division of Strategic Vision Inc., a San Diego-based consumer-research firm.

How Competitors Fare

Within the small-car segment, Civic is “still grabbing a younger, somewhat wealthier crowd,” Edwards said. The median age of its buyers is 45, compared with a segment average of between 49 and 50 years old, he said.

Volkswagen AG (VOW)’s Jetta draws a younger customer, with a median age of 41, because of its cheaper base price and Hyundai’s Elantra matches Civic with a median buyer age of 45, said Edwards, whose firm surveys 300,000 people a year for its automotive studies. Jetta’s starting price is $15,515, according to Edmunds.

The average Corolla buyer is 49, while the median age for customers of Ford Motor Co. (F)’s Focus is 53 and Chevrolet’s Cruze is 58, Edwards said.

GM’s data indicate that the average Cruze buyer is about 53, Jim Cain, a company spokesman, said in an interview.

Honda’s problems last year didn’t keep it from a top- ranking spot in terms of brand consideration, with 50 percent of people in the market for a new car saying they’d consider it, Edwards said, citing Strategic Vision data.

Inventory had a bigger impact on Civic sales last year than Consumer Reports’ review, said Iwamura, 60, who becomes Honda’s executive vice president on April 1 and will continue to lead North American operations.

“I accept their criticism very sincerely, but yet believe we’ll be able to make them once again a strong fan of the Civic,” he said.

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

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


Cash Is for Losers
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus