Bloomberg News

Honda Prices Acura ILX to Attract Gen-Y Buyers From BMW

March 29, 2012

The Honda Motor Co. Acura 2013 ILX concept vehicle is displayed during the 2012 North American International Auto Show (NAIAS) in Detroit. Photographer: Scott Eells/Bloomberg

The Honda Motor Co. Acura 2013 ILX concept vehicle is displayed during the 2012 North American International Auto Show (NAIAS) in Detroit. Photographer: Scott Eells/Bloomberg

Honda Motor Co. (7267), seeking a 46 percent jump in U.S. Acura brand sales this year, priced a new “near premium” compact sedan to attract car buyers in their 30s and keep them out of competing BMW and Audi models.

The 2013 ILX, which goes on sale in May, starts at about $27,000. It’s aimed at older “Generation-Y” customers who aspire to own a luxury vehicle and have limited income, Jeff Conrad, vice president of Honda’s Acura unit, said this month. Honda’s U.S. sales target is 40,000 annually of the ILX, which shares underpinnings with the Civic compact.

The target “seems pretty ambitious,” because younger drivers have been hurt the most by weakness in the job market since 2008, said Jessica Caldwell, an analyst for researcher Edmunds.com. “It’s a bit risky aiming your new vehicles at this group that’s basically falling off the map.”

Acura was the first U.S. premium brand from an Asian carmaker. Sales have been volatile, peaking at 209,610 in 2005 before plunging to 105,723 in 2009. The company sold 123,299 Acuras in the U.S. last year, less than half the 247,907 luxury vehicles sold in the U.S. by Bayerische Motoren Werke (BMW) AG’s BMW, No. 1 seller last year of luxury cars and trucks.

Honda says the recession left consumers more cost-conscious and potentially open to Acura vehicles that sell for less than BMW, Volkswagen AG (VOW)’s Audi and Toyota Motor Corp. (7203)’s Lexus. Honda wants to raise total Acura U.S. sales to 180,000 vehicles this year.

‘Gateway’ Model

“They are making more-rational purchase decisions within the luxury category,” Conrad told reporters in Scottsdale, Arizona, this month. Both the ILX and new 2013 RDX compact sport-utility vehicle, which goes on sale in April, are for people with “aspirational goals, but affordability is an issue.”

Along with ILX, the company is targeting annual sales of 30,000 RDX SUVs annually. Next week, Acura also will show a revamped large sedan at the New York auto show that will replace the current RL late this year, followed by a new NSX supercar due in about two years.

“The ILX will act as the gateway to the Acura brand,” said Lee DaSilva, a senior product planner for Tokyo-based Honda.

ILX’s styling may not be edgy enough for some targeted buyers.

Breanna Gaudet, a 31-year-old public-relations specialist in the Toronto area, said she wants to replace her current 2010 TSX with either a newer TSX or Audi’s Q5 SUV, rather than the ILX.

Dog Room

“I looked at the new ILX at the Toronto auto show,” Gaudet said. “It looked decent but I prefer the more aggressive look of the TSX.”

She’s looking at premium models with more power and better fuel economy and that are roomy enough to a fit a “large dog” in the back, she said in an e-mail.

Generation-Y refers to the 75 million people born in the U.S. from 1978 through 1994, according to Honda. That’s as large as the baby-boomer segment that continues to be the biggest buyer of both mass-market and luxury vehicle, Honda said.

A median Acura buyer is 49, male and married, according to San Diego-based Strategic Vision, a consumer research company. The median age for all luxury auto buyers is 56, said Alexander Edwards, president of Strategic Vision’s automotive practice.

Audi and Nissan Motor Co.’s Infiniti attract a slightly younger customer, with a median age of 48. Lexus buyers have a median age of 58, according to Strategic Vision.

With ILX, Acura will offer four sedans, including the $29,810 TSX, $35,605 TL and $47,700 RL, Conrad said. There are no plans to discontinue any of those models, he said.

ILX Options

The base ILX has a 2-liter, 4-cylinder engine with standard “connectivity” features including Bluetooth, Pandora and text messaging function. For about $30,000, buyers can choose a 2.4- liter, sport version or 1.5-liter, hybrid ILX, Conrad said.

The car is positioned against small models, including Audi’s A3 hatchback, General Motors Co. (GM:US)’s new Buick Verano sedan and Lexus’s CT 200h hybrid hatchback, Conrad said. Base prices are $27,270 for the A3; $23,470 for Verano; and $29,120 for the CT 200h, according to company websites.

The ILX will be built at Honda’s Greensburg, Indiana, plant and arrives at dealerships May 25, the company said. The factory also assembles Civic compacts. The hybrid ILX, with a lithium- ion battery pack, gets a combined 38 miles (61.1 kilometers) per gallon in city and highway driving and will be Honda’s first gasoline-electric auto built in North America.

Acura is based in Torrance, California. Honda’s shares fell 0.6 percent to 3,155 yen as of 9:26 a.m. in Tokyo trading.

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


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