While many car makers have struggled for US market sales this year, Honda has quietly vacuumed up more share than any other competitor in the first half of 2003, Reuters said.

The news agency said Honda has gained despite offering smaller average incentives than Detroit’s Big Three and fellow Japanese brands Toyota and Nissan. The result, Reuters said, shows how one or two well-timed hits can boost a car maker’s fortunes.

According to the report, for the year to the end of June, Honda grew its US market share by 1.1% to 8.1%, despite a weak showing by its Acura luxury unit, which has seen sales fall 5%. Analysts typically say just one-tenth of a market share point can mean tens of millions of dollars in additional profits, Reuters noted.

The report said that almost all of the increase has come from two new sport utility vehicles – the Element (see , a small SUV targeted at younger buyers, which has sold nearly 35,000 units so far this year, with little effect on sales of Honda’s other small SUV, the CR-V.

However, Reuters said, the biggest boost to Honda’s US sales has come from the eight-passenger Pilot SUV that’s been a smash hit with 51,183 sold to the end of June. The $US33,000 Pilot has been in tight supply since it was launched late last year with Honda dealers holding only seven to 10 days’ supply, compared with a typical 60-day inventory, the report added.

Honda spokesman Andy Boyd told Reuters that the car maker has boosted production plans for both models and is aiming to build 70,000 ELEMENTS and 70,000 Pilots in the US annually.

“When we launched the Pilot, we said we had 90,000 customers a year that were defecting because we didn’t sell a larger SUV,” Boyd reportedly said. “The Element is bringing in new buyers, and about 50% of Element owners are all new to Honda.”

Separately, several UK publications recently reported that Honda US is about to begin shipping right-hand drive Elements to Japan. The publications suggested Honda Europe should replace the ageing HR-V (a smaller Honda SUV not sold in the US) with the American-built Element, a view just-auto has echoed (see: Honda’s pitch to Generation ‘Y’: the Element )

Reuters said that, unlike most Detroit SUV models that are based on truck underpinnings, with a separate chassis frame, the Pilot and the Element are built on (monocoque) car frames, giving these so-called “crossover” vehicles more car-like ride and handling, a trait that many US buyers seem to prefer.
US. sales of vehicles such as the Pilot and the Toyota Highlander are up 36% this year, far more than any other segment, Reuters noted.

The news agency cited Merrill Lynch analyst John Casesa as saying that such crossovers are soaking up customers who might otherwise buy minivans or small traditional sport utility vehicles.

“That is a hot, hot market,” Casesa reportedly said. “That market is 56% Japanese (car makers), and that’s one of the reasons mathematically the Japanese are gaining share this year.”

Reuters noted that, while the Pilot has some foreign-brand competitors in the US, it has benefited in part from a lack of direct competition from Detroit’s Big Three – the most comparable models are GM’s Buick Rendezvous and Pontiac Aztek SUVs though, to the end of June, the Pilot had outsold both of them combined.
However, in a report in its 7 July issue, BusinessWeek magazine noted that, though Honda is tough to beat in the US, earning $1,581 on every vehicle sold last year in North America, compared with General Motors’ $701, Honda’s results are less successful at home in Japan.

In May, Honda new car sales fell to 21% below last year’s level, the eighth straight month of declines, BusinessWeek said, and, after nudging Nissan aside in 2000 to become second only to Toyota in Japanese market car sales, Honda this year slid back to third place. “We’re losing to the competition,” Koichi Amemiya, Honda’s executive vice-president, told reporters recently, the magazine said.

According to BusinessWeek, Honda executives concede there’s a problem. The magazine said Honda’s Japanese-market model line looks tired at a time when rivals have been bombarding the market with sleek new models while Honda has taken a big hit in its core minivan operations: Toyota, Nissan, and Mitsubishi Motors have all launched “spiffy” new minivans that are luring buyers away from Honda’s Odyssey, Stream, and Stepwagon models.

BusinessWeek speculated that those ills may have contributed to the surprise retirement of former president Hiroyuki Yoshino, who announced his departure in April and added that new president Takeo Fukui must revive Japanese sales by successfully executing a plan that includes new models, more salespeople, and more dealerships.

That appears to have started, already. According to BusinessWeek, Honda launched a new Inspire sedan line on June 19. While the previous Inspire was an adapted version of the Acura TL that Honda sells in the US, the new model was designed for the domestic market, the magazine added.

BusinessWeek said the Inspire isn’t expected to generate huge volume but, with a price tag from $US23,000 to $30,000, it’s likely to deliver margins well above the 3% to 4% Honda makes on most cars it sells in Japan.

Honda also has a new Odyssey minivan in the works, BusinessWeek noted, adding that Japanese sales of the once-stalwart minivan fell to 52,000 units last year, down from a peak of 120,000 in 2000.

Honda also plans to update its tiny 600cc Life minicar and, to help shift the new models, add 500 new salespeople and open 90 new dealerships in major cities this year, BusinessWeek said.

“The linchpin of Honda’s strategy is America,” an HSBC Securities Japan car analyst, Christopher Richter, told BusinessWeek. “But it can’t write off Japan because it provides it with volume and a test bed for innovations.”