Tuesday, March 8, 2005

Honda considers boosting incentives

Japanese automaker seeks to pump up lackluster Accord, Civic sales in U.S.

By Alan Ohnsman / Bloomberg News

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Honda Motor Co., stung by a 21 percent drop in Accord and Civic car sales this year, said it may have to offer cheaper loans and leases and raise dealer incentives to bolster sales of its two best-selling U.S. models.

Honda, Japan's third-largest automaker, last week had an 8.3 percent sales decline in the United States for January and February compared with a year earlier. Sales of its Accord and Civic fell by 20,291 units in the first two months of the year.

The Tokyo-based company, which is planning to sell a new version of the Civic this year, has spent 49 percent less than the industry average on incentives in the past four years. Now, with sales down in part because of bigger incentives for competing Toyota Motor Co.p. and Nissan Motor Co. cars, Honda is narrowing the gap.

"It's the money factor," Andy Boyd, a spokesman for Honda's U.S. unit, said in an interview Monday. "Spending in the segment from Toyota and Nissan is three to five times what we're spending. We're probably going to have to get in step with that, but we don't intend to do anything we're loath to do." Honda is led in the United States by Koichi Kondo, a managing director of the parent company.

Honda, which doesn't offer consumers cash back on car purchases like some rivals do, still spent a record $2,943 per vehicle last month on incentives, including low-interest loans and cash to dealers, according to CNW Marketing Research, based in Bandon, Ore. That compares with an average $4,423 that CNW estimates automakers offered in February.

CNW's estimate, which Honda doesn't accept, includes the value of added content such as six-disc CD players and alloy wheels the company offers on so-called special edition versions of the Civic, for example, rather than cash rebates.

Honda, which for the past five years has had the highest average profit margin among automakers selling in the United States, spent 33 percent less on incentives in February than the industry average.