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Honda Says New Models May Persuade Japanese Customers to Stick With Brand




Honda Says New Japan Models May Help It Retain More Customers
March 26 (Bloomberg) -- Honda Motor Co., Japan's second-largest automaker, said the release of four new or revamped models this year may help persuade more of the nation's 8.5 million Honda owners to stick with the brand when changing cars.

The automaker aims to get 70 percent of customers to trade up to its newer models, from 60 percent, Director Manabu Nishimae said in an interview. ``There are no secret weapons, we just have to continue offering variations of attractive models and the best customer satisfaction we can at our dealers.''

Honda, which may post a third straight record annual profit on overseas sales gains in the U.S. and Asia, needs to stem a decline in customers at home. Sales in Japan fell about 18 percent in 2003 as demand sagged for its Fit compact car and other ageing models. Honda lost its No. 2 domestic sales rank in 2003 for the first time in four years, to Nissan Motor Co.

``For Honda, the U.S. is a far bigger market by volume and profit, but Japan is very important for the company to have a good balance,'' said Masayuki Kubota, who helps manage the equivalent of $8.5 billion at Daiwa SB Investments Ltd. in Tokyo. ``You can't really find an automaker that's doing well elsewhere unless they have solid performance at home.''

There are about Honda owners in Japan today, compared with about 5 million in 1994, Nishimae said. He didn't say when the company plans to reach its 70 percent loyalty goal.

Honda shares, which have risen 14 percent in the past year, fell 0.8 percent to 4,720 yen in Tokyo.

Repeat Customers

Honda now scores worse in customer loyalty at home than bigger rival Toyota Motor Corp., which has 70 percent repeat buyers, Nishimae said, citing Honda's internal data. Honda's customer loyalty is probably a little weaker in the U.S. than at home as it offers fewer models there, he said.

The maker of Civic compacts expects earnings in Japan to improve in the business year starting next month, with more planned releases of pricier, more profitable new models, Nishimae said.

The company has said it will fully redesign its Legend luxury sedan by the end of 2004. It will release a bigger minivan than the Odyssey around May, Honda President Takeo Fukui said in a separate interview.

``The new models will help Honda's profitability in Japan,'' Nishimae said. He reiterated that the company has no plans to consolidate its Clio, Verno and Primo dealership chains, which have a total of 2,420 outlets in Japan, about half of Toyota's.

New Segment

Honda has a good record of luring new customers with innovative model releases, J.D. Power Asia Pacific Inc. said.

With the release of its Odyssey in 1994, Honda became the first automaker to introduce a minivan in Japan, creating a new market segment. It then released other minivans such as the Stepwagon and Stream, while rivals including Toyota and Nissan Motor Co. followed, analysts including Koji Endo at Credit Suisse First Boston Japan Inc. have said.

Minivans and luxury sedans typically provide a profit per unit of more than 500,000 yen, while compacts generate about 200,000 yen per car, analysts including Koji Endo at Credit Suisse First Boston Japan Inc. said.

Honda is already seeing earnings improvements. The automaker sold more of its pricier models in the October-December quarter, boosting revenue per car by 5 percent, or 103,000 yen ($976), from the year-earlier period.

Honda ranked second after DaimlerChrysler AG's Mercedes-Benz unit in a 2003 Japanese customer satisfaction survey, J.D. Power Asia said.

`Difficult' Target

Honda said in January that its domestic unit sales may fall 13 percent to 735,000 in the year ending this month. Even meeting that target ``may be a bit difficult,'' Nishimae said.

With new models to be released in the year starting April 1, the automaker is confident it will meet its calendar-year unit sales target of 800,000, up 8.1 percent from 2003. Sales will eventually reach the company's 1 million-unit target, Nishimae said, without giving a timeframe.

``We are now more focused on the quality of sales and not just the volume,'' he said.

The resale value of Honda cars is higher than the industry average in the U.S., Nishimae said, adding that the Japanese used car market will also grow. The U.S. used car market totals about 45 million vehicles, almost triple the new car market. Japan's used car market, excluding minicars, is about 4.5 million units, while the new car market totals about 4 million.

 

glad they are more focused on product quality, because i've heard a lot of complaints about the '03 accords...it seems to be filled with all kinds of bugs...