Honda Increases U.S. Auto Market Share

DETROIT, July 2, 2003; Justin Hyde writing for Reuters reported that while many automakers have struggled for sales this year, Honda Motor Co. Ltd. has quietly vacuumed up more U.S. market share than any other competitor in the first half of 2003.

Honda has gained despite offering smaller average incentives than Detroit's Big Three and Japan's Toyota Motor Corp and Nissan Motor Co. Ltd. And it shows how one or two well-timed hits can boost an automaker's fortunes.

Through June, Honda had grown its U.S. market share by 1.1 percentage points to 8.1 percent, despite a weak showing by its Acura luxury unit, which has seen sales fall 5 percent. Analysts typically say just one-tenth of a market share point can mean tens of millions of dollars in additional profits.

Almost all of Honda's increase has come from two new sport utility vehicles. The Honda Element, a small SUV that Honda targeted at younger buyers, has sold nearly 35,000 copies so far this year, with little effect on sales of Honda's other small SUV, the CR-V.

But the biggest push has come from the Honda Pilot, an eight-passenger SUV that's been a smash hit with 51,183 sold through June. The $33,000 Pilot has been in tight supply since it was launched late last year; Honda dealers have about a seven to 10 days' supply, versus a typical inventory of 60 days' supply.

Honda spokesman Andy Boyd said the automaker has boosted production plans for both models and is aiming to build 70,000 Elements and 70,000 Pilots 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 said. "The Element is bringing in new buyers, and about 50 percent of Element owners are all new to Honda."

CROSSING OVER

Unlike most Detroit SUV models that are based on truck underpinnings, the Pilot and the Element are built off car frames. That makes the ride and handling of these so-called "crossover" vehicles more car-like, a trait that many buyers seem to prefer.

U.S. sales of vehicles such as the Pilot and the Toyota Highlander are up 36 percent this year, far more than any other segment. Merrill Lynch analyst John Casesa said that such crossovers are soaking up customers who might otherwise buy minivans or small traditional sport utility vehicles.

"That is a hot, hot market," he said. "That market is 56 percent Japanese (automakers), and that's one of the reasons mathematically the Japanese are gaining share this year."

While the Pilot has some foreign competitors, 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; through June, the Pilot had outsold both of them combined.

GM also happens to be the automaker who's suffered the steepest market share decline in the first half of 2002, losing 0.9 percentage points. While GM's truck lineup has performed strongly, its car lineup has not. It will launch a new Cadillac crossover later this year, with a Chevrolet model coming next year.

Honda's success in the United States -- the world's largest auto market -- has come as the company has struggled in Japan. Sales in the home country are down 20 percent this year due to a dearth of new models.

But analysts estimate Honda has earned 70 percent of its profits from North America over the past two years. Thanks to plant expansion, Honda will probably have more production capacity at its North American plants in Ohio, Alabama and Ontario, Canada, than in Japan by 2004, Merrill's Casesa said.