Having survived eleven years of a burst Bubble Economy that then turned into a decade-long downturn, you might think that the worst was over for Japan's carmakers at home. But 2003 has been the stuff of nightmares for one in particular: Honda. Worryingly, things have been getting worse, month-by-month, in a recovering market. Glenn Brooks reports.

When a company's sales start falling in a rising market and continue to do so for eleven straight months, clearly, something is dramatically wrong. But, worryingly, Honda's management does not seem to be overly alarmed. Here is what President Takeo Fukui had to say on the matter when questioned last week: "I expect sales in October will top last year's level." That was it. No comment on why the Civic, for example, is currently in position 83 in the overall Japanese sales tally for 2003. That incidentally, puts it not only behind the ten-year-old Odyssey minivan but also the BMW 3 Series, while its long-time rival, the Toyota Corolla, remains at number one.

Fukui-san was speaking on the eve of the biennial Tokyo motor show, an event where Honda, especially, needed to shine. As it turned out, four new concepts were displayed alongside a sole new model - not quite the much-needed product renaissance shareholders and industry-watchers alike had been anxiously waiting. One must now wonder if the company's management truly grasps how serious the sales situation in Japan is. Might we even be witnessing the start of Honda being squeezed out by the juggernaut that is Toyota and a heavily-investing and resurgent Nissan Motor?

Downward sales spiral
Surely a company as traditionally innovative as Honda must have a catalogue full of class-leading models, you say? Sadly not. The Civic is just one of many cars caught in a downward sales spiral. Take the MDX. This premium-priced challenger to the Lexus RX300/Toyota Harrier was introduced only in March. In less than six months, its sales have halved to a grand total of 68 units for August, the latest month for which data is available. Likewise, the Life minicar, Honda's second best selling model: sales in March were almost 19,000 but by August had collapsed to just over 7,500. Luckily, Honda replaced the car in September but it is as yet too early to say whether it will solve the company's minicar woes. Styling-wise, the new Life says nothing new in a class that thrives on novelty - just look at the hugely successful Suzuki Lapin.

Fit still doing well, but other model sales lacklustre
It's not all bad news, though: the Fit (Jazz in Europe) hatchback has battled the Corolla throughout 2003 for the title of Japan's top-seller. As at the end of August, and despite Toyota's generous incentives throughout 2003, the Corolla had been unable to pull out a convincing lead (138,077 versus the Fit's 133,233). This, more than any other factor, however, is arguably keeping Honda's executives safely removed from reality. It may seem terrific to have the country's number two best seller challenging the number one but when you look back down the sales chart's top ten you see four Toyotas and Daihatsus, two Nissans and one Suzuki but no other Honda. This, remember, is Japan's number three maker, just behind Nissan in size and far larger than Toyota's Osaka-based minicar subsidiary or Suzuki.

Look further down that chart and things start to look quite worrying for Honda. How many cars might you guess Toyota and Daihatsu have in the top 30? Totals of 11 and 2 respectively. Very impressive but not really surprising. Honda? Try four, of which only one, remember, is in the top 10. In a market where minivan sales are booming, the Mobilio lies in 20th place (less than two years old and with August sales a third of their March '03 levels), the StepWGN is 23rd, the Vamos scrapes in to 36th place and the recently facelifted Stream only manages 40th, with the latter two each falling well short of 30,000 sales. In August alone, Honda's overall sales fell 14.9% to 48,817 vehicles, the 11th consecutive month of decline.

Tokyo offers little real relief
Help, surely, must be at hand, this being a Tokyo motor show year - a wealth of new models surely must have been in the pipeline to be previewed as concepts? It would seem not. Leaving aside the small matter of spending money on a replacement for a car that has found a mere 66 new owners so far this year, the 14 year old NS-X is overdue for a full model change. It would now seem that the new model will resemble the HSC concept from last week's show. And yet what could, and should have been a cutting edge supercar prototype, is instead something of a same-again derivative - not quite the image-leader Honda's range so desperately needs.

What about the cars on everyone's shopping list in fad-mad Japan: hybrids? Astonishingly, Honda has not only had it face rubbed very hard into the dirt by Toyota (a grand total of 41 Insights sold so far this year) but showed only ONE hybrid concept at Tokyo, the fantastically-styled but practicality-challenged IMAS. Where are the rivals to Toyota's Crown, Estima and Alphard mild-hybrids, not to mention the petrol-electric Prius, fast becoming the most-desired Toyota of recent memory on both side of the Pacific with the order books full to bursting?

Honda sales in Europe and NA on the rise though
It can't all be bad news for Honda, though, and it isn't. As those in Japan collapse, both European and North American sales are on the rise. Yet even here, there are peculiarities and large causes for concern. It is inexcusable that Honda has taken until now to build a diesel engine for the Accord: the Passat 1.9 TDI continues as the Europe-wide market leader it has been since 1979. Would it also be unkind to mention that the Civic continues to have to make do with an old bought-in Isuzu unit? Best ignore too, the lack of any form of compression-ignition engine for the Jazz, this car remember, being its maker's second-best seller across EU markets.

The clever and memorable television and 'net advertising campaign for the Accord can't be the only reason why sales of this family sedan have almost doubled this year, can it? What distinguishes the new Accord from its predecessors is excellent handling, standout styling and a roomy, high-quality interior. It would be ironic indeed if, having made the decision to end UK-production of the Accord and import the new generation from Japan, Honda was forced to look again at European production due to ever-rising sales. That possibility grows ever stronger as the months go by and the sales orders to Japan grow ever larger.

Overall, Honda Europe does finally seem to have broken out of the ever-repeating pattern of similar sales numbers year-in, year-out, thanks to the Accord and Jazz, both highly acclaimed and great-looking cars. Backed up by steady numbers of CRVs and Civics heading out of showrooms and with the aforementioned Accord turbodiesel on the way at long last, things look as though they're getting a lot better at long last.

In the USA, the larger NAFTA Accord continues to challenge the Camry for the title of America's best-selling car, with the latest generation Civic also doing fine. Add to that list the Odyssey, a premium-priced minivan that continues to fly out of showrooms (with next year's replacement just previewed by the ASM concept at Tokyo), and you soon realise that North America continues as a veritable goldmine for companies with a strong range and the ability to hold their nerve by minimising their own participation in an incentives war. Having said that, Acura could do a lot better. Though it seems destined to remain the sleeper of Japan Inc's luxury brands, there are bright spots: the new TL is off to a strong start, while the success of the MDX is in complete contrast to the complete failure of its Honda-badged twin back in Japan, as mentioned earlier.

So provided things stay as they are, or, as seems more likely, reach ever higher levels of success in the two giant export markets of America and Europe, might Honda not need to worry too much about the dramatic sales collapse in Japan? No, it must act urgently - this really is a very serious decline and could soon get a lot worse.

Dramatic downturns at home have a nasty habit of affecting Japanese makers' product planners' confidence - just look at the bland cars that Nissan's designers began to churn out 20 years ago when things first started and then continued to go wrong. Let's not also forget just how important loss of face can be when it comes to trying to restore a winning reputation.

Should the Fit start to lose its image as the sprightly, funky car of the moment with the introduction of newer, trendier rivals, a sudden sales collapse might soon follow. This is exactly the fate that has befallen former recent overnight sensations such as the (Toyota) WiLL Vi, Mitsubishi EK-Wagon and Mazda Demio. And where will Honda be then? In urgent need of a new best seller.

As even ultra-focused Nissan's efforts continue to show, trying to release Toyota's stranglehold of the sales charts is an extremely difficult business. Let us hope, for Honda's sake, that the all-new Odyssey has what it takes to tackle Toyota's all-conquering Wish in the big-volume minivan sector. That would be a good place to start the much-needed new product blitz, followed by a thoroughly revamped Fit, ready to tackle next year's all-new Toyota Vitz (Yaris/ECHO). If either of these crucial new Hondas or the new Life minicar fails to get buyers excited, then this once high-riding company might find itself largely pushed out of volume sales in its home market. Possible? Yes. Likely? Don't bet against it.

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