December 11, 2013
A seldom-used incentive plan might help Honda regain its stride after a disappointing November.
The automaker hopes to finish strong in a year that is already one of its best ever, continuing a rise in sales in the months since the 2011 tsunami in Japan stalled production.
To encourage that strong finish, Honda is giving dealers a $3,000 bonus for each light vehicle (noncommercial) they sell in December in excess of that store’s December 2012 sales total. Dealers can use the money however they like.
This incentive, first reported last week by The Wall Street Journal, is particularly unusual for Honda, which uses these kinds of promotions less than most of its competitors.
“It’s been an incredible year for Honda, with retail-sales leadership in most major vehicle segments, but as the year comes to a close, we are looking to our dealers to ‘best themselves,’ and push beyond what they achieved last December,” said John Mendel, executive vice president of sales for American Honda, in a statement.
The promotion might be tied to an oversupply of vehicles, said Alec Gutierrez, senior analyst for Kelley Blue Book. He notes that dealerships have more than a 90-day supply of key models, such as the Accord. That is more than the 60-day supply Honda would like.
“It could be that they are trying to sell down that excess inventory so they have a clean slate going into the new year,” he said.
These kinds of “dealer cash” incentives are common in the industry, but not for Honda, said Jim Ziegler, a consultant to auto dealers and a columnist for Ward’s Auto.
“They never do this much money,” he said. “This is very uncharacteristic.”
Steve Lindsay, co-owner of Lindsay Honda on the Far East Side, said, “We’re definitely seeing (Honda) be more aggressive.” He declined to comment about this specific incentive.
Honda sold 116,507 vehicles in November, down 0.1 percent from a year earlier. That was viewed by some analysts as a disappointment. Honda executives noted that they were competing against their best November ever, and said they were pleased with the results.
From January through November, Honda sold 1,390,057 vehicles in the United States. That puts the company within reach of its record, 1,551,542 , achieved in 2007.
This year’s sales pace also continues the steady recovery from the March 2011 earthquake and tsunami in Japan. The natural disasters led to disruption in shipments from parts suppliers and a resulting loss of sales because of an inadequate supply of vehicles.
“We’re not expecting” to break the record, said Chris Martin, a Honda spokesman. “It would be a big stretch for December, and our dealers are capable of it, but it really comes down to consumer demand.”
While Honda can choose whether to look at the glass half full or half empty, the U.S. auto industry is nowhere near its sales record of 17.4 million vehicles in 2005. As of November, the 2013 total was 14.2 million.
Honda is doing disproportionately well in the current market because its lineup is strongest in segments that have grown the most, such as compact cars and compact SUVs. This is in contrast to the mid-2000s, when the hot vehicles were larger SUVs, said Jesse Toprak, an analyst for Truecar.com.
“Any category with ‘large’ in front of it did well” then, he said. “Financing was so much easier. You essentially just needed a pulse to get a car loan.”
One of the constants has been Honda’s dominance of the central Ohio market. From January to November, local residents bought 14,245 Honda-brand vehicles; next was Ford with 9,468, according to Autoviewonline.com.
Honda benefits from its status as a major regional employer, with assembly plants in Marysville and East Liberty.
“It makes consumers feel good about the brand because they’re supporting so many local employees,” said Jessica Germain, general manager of Germain Honda in Dublin.
Because of this built-in loyalty, several of the local dealerships said they expect to set sales records even if the automaker doesn’t.