Honda sets its targets low

New car launches are renowned for optimistic speeches with encouraging outlooks for the future. But that wasn't the case at last week's launch of the Honda Odyssey. Lowered sales targets, a weakening dollar, the possibility of more price increases and a focus on simply keeping dealers viable were the most striking elements of the company's presentation.

Honda Australia is anticipating taking a 20 per cent sales hit this year as the Global Financial Crisis takes its toll on new car sales. The release of VFACTS figures for March last week (more here /news/2009/vfacts-for-march-dead-cat-bounce-14711) shows the Australian market currently also 20 per cent down below last year.

Lindsay Smalley, Sales and Marketing Director for Honda Australia, admits the company is expecting to sell 48,000 cars this year compared with 60,529 in 2008, because the current economic climate is affecting both consumer confidence and the value of the Australian dollar. The dollar has dropped considerably against the Japanese Yen and the Thai Baht -- and Honda sources the majority of its line-up from Japan and Thailand.

"I think the first three months are over and the Australian car market looks like its 20 per cent down on the previous year," Smalley says. "So that should come in 820,000 units for the year. We're ordering four to six months out and our planning volumes are working on that assumption."

Having already increased prices in January this year as a result of the changes in the exchange rate Smalley didn't rule out further increases later this year if the situation continues to worsen.

"Our greatest immediate hurdle by far is the inequity between the Aussie dollar against the Yen and the Baht," he says. "As a result of this we've had to increase prices in early January and we're now carefully monitoring the market. While we can't rule out a further price increase during the year we are mindful of the value-benefit equation that is a key purchasing decision for many customers and we'll do our utmost to preserve that."

Although Smalley says the company's sales year-to-date have met expectations (at 4,000 cars per month on average), he doesn't sound confident about the future. Unlike many of his counterparts, Smalley isn't anticipating any turnaround in the economy in the near future -- or a consequent new focus for Honda.

"When the world financial landscape changed last year Honda responded quite decisively by reducing our dealer stock levels and trying to ease their [dealers'] financial burden," he says. "Now that we've seen our initial customer reaction to the crisis our next challenge is to have the right model mix, not only for today but also tomorrow, and ensure that our dealer network survives through this lower sales period and hopefully prospers through the sales downturn and is there, ready, when the sun does come up."

Despite the prospect of falling sales Smalley ruled out any significant stock clearance programs, similar to those undertaken by Mercedes-Benz recently, for fear it would damage the image of the company.

"We will continue to run programs on our new vehicle sales to ensure our competitiveness but we certainly won't be getting into distressed stock clearance mentality; actions that could damage our brand in the longer term," he says.

"Our plan is to focus on Honda's core brand attributes. Our engineering excellence, our outstanding value, superb quality, reliability, comfort, fuel and emission efficiency and our strong re-sale value -- and of course the very strong driving enjoyment."

Instead of distressed stock sales, the company will focus on improving its after-sales services to keep dealerships afloat. A new service pricing system is a major part of the short-term plan of keeping dealerships viable.

"We're working closely with our dealers to ensure there is greater focus on the backend of their business; parts, service and accessory sales," he says. "We are introducing a service menu pricing concept across all of our dealerships to ensure a consistent price throughout the network with the only major variable being the cost of labour due to the demographic location of the dealer."