Honda's product-led brand recovery

It's well known that the Honda NSX (pictured) is a very different car from the original conception that pre-dated the Global Financial Crisis (GFC) in 2008.

Honda Australia Director Stephen Collins believes that the GFC marked a watershed for Honda globally. By the end of 2008, Honda's sales in the USA had fallen by nearly eight per cent and its total for the year was the lowest figure posted by the company in four years. It's no surprise that Honda retreated into its shell, investing relatively more of its R&D budget on 'core' models that lacked the same flair and innovation of 'supporting' Hondas. And a 'supporting' model like the NSX was delayed while Honda reconsidered what the premium sports car should say about the company in the 21st Century. The end result, as everyone now knows, is a hybrid to rival BMW's i8.

The response to the GFC had a flow-on effect around the world, of course. But Honda is finally recovering, says Collins, and in Australia it's the HR-V that has been the catalyst for that. Most of Honda's models sold in Australia have improved on their 2014 results – the soon-to-be replaced Civic being an exception – but it's the 9199 extra sales from the HR-V that have put the spring back in the step of local Honda dealers. With two months of the year remaining, Honda is already ahead of its full-year sales figure for 2014, and is poised to record a sales figure of over 40,000 units for the first time since 2010.

"Clearly, during the GFC period there was a reduction in investment for research and development," Collins told motoring.com.au last week. "It didn't stop, but there was a reduction. Principally, research and development sits at the core of what Honda's all about. So whether it be bikes, planes, cars... whatever it may be.

"What we're seeing now is products coming out the other end of that. For example, HR-V and NSX and others... show that there's still a massive investment in R&D. I feel very confident that R&D will continue to deliver great technology, practical technology..."

Honda in Australia has also been hobbled by unique market conditions that make it harder to introduce 'supporting' models. It costs money to homologate cars for ADR (Australian Design Rule) compliance, so any company planning to sell a car here will want to be certain it has broad-based market appeal or has a lot of profit margin built in before any paperwork is submitted to the Department of Infrastructure. This frequently adds to the landed cost of a new car, which is why some products Honda sells overseas won't ever see the light of day here – like the Jade, a small wagon developed primarily for the Chinese market, but also available in right-hand drive. And Honda's heavier reliance on volume-selling 'core' models that are perceived to be bland may have damaged the brand locally.

"We've always tried to source the best available product, but of course the business case has got to stack up," Collins explained. "We've got to be able to deliver whatever it is at an affordable price to the market...

"Over the last seven or eight years it's been a challenge, but the Australian market is a challenge for everyone. It's arguably one of the most competitive in the world. The Aussie dollar fluctuates greatly... but that's not just a challenge for us, it's a challenge for every importer.

"The key is that we're trying to get our sporty mojo back, and I feel confident in... that we're well on the road to get that back. I think there's still work to do...

Next year's Civic is crucial to Honda rebuilding its brand image in Australia, and it's hoped that Honda customers currently driving an Accord euro might be prepared to 'downsize' to the new generation of small car. Collins, if he has a sales projection in mind for the new Civic, wouldn't reveal the number. But if he could bottle lightning a second time, he would be wiring up the Civic to the HR-V.

"I'm not sure [of] a number, but we'd want to be a bit like HR-V. We'd want to be in the top number of small cars. Our domain is basically private sales. So if I think we're in the top three, for example, of private sales, that's what we should be aiming for. We're there with HR-V; we're number one in private sales with Odyssey. That's what we want to be. Our job is to get Civic back on the shopping list. We'll deliver a really attractive proposition in terms of price and spec and technology, and so forth."

Although Honda Australia was fortunate to have the right car launched at the right time, Collins believes the whole HR-V launch went off without hitch – and that was more about management than luck.

"We started with a relatively modest pre-sale period. We launched it pretty hard; we went hard in above-the-line media and below-the-line. It's a combination of just getting general awareness out there, but secondly is getting cars on the road. There's nothing like getting cars on the road. We had really good support from the dealer network. What we're seeing is that we're conquesting a lot of our buyers with HR-V – which is very important for us.

"It's just awareness. That's a combination of 'paid' media, 'not-paid' media... PR plays a role. We've just got to get all those ingredients together and all working to raise awareness. The battle is just getting on the shopping list. Consumers have a lot of choice – and a growing choice: CX-3 and others. HR-V stands up pretty well."

The HR-V is "on track to sell 11,000 for the year" says Collins. Its peak month to date saw it sell 1300 units, but it's averaging about 1000. At 9199 sold for the year ending October, the HR-V is less than 1000 sales behind its archrival, the Mazda CX-3. It's fourth in the segment, behind Hyundai ix35, Mitsubishi ASX and the CX-3. The Hyundai won't be prominent in the small SUV segment from next year, having been replaced by the Tucson, which sits in the medium SUV segment.

With its sales already closing in on five figures, the HR-V's standing in the market place is also being boosted by word-of-mouth, the ownership experience.

"Word of mouth is huge," says Collins. He would like to emulate the HR-V's success for the Civic, but sees the two cars set apart by the unknown quantity factor in the HR-V.

"The difference with Civic is awareness of Civic is already pretty good, so I don't think we're starting from such a low base on awareness of what it actually is. But having said that, we'll replicate many of the things that we did with HR-V. We'll launch it hard and we'll sustain that launch... create that word of mouth, get the dealers motivated. We've already shared a lot of this information with our dealer network. I think we'll do many things we did with HR-V... but we need to do it better.

"Arguably, the small-car segment, alongside the medium SUV segment are the two most competitive there are – a lot of good cars, so you need to do plenty right."

What Honda has in store

NSX
"It will be late next year," says Collins. "We've said all along it will be 2016; it was pushed back a couple of months, but we're certainly anticipating it will be in the last quarter. I don't expect it should push out any more than that.

Civic
"The sedan will come first; that will be mid-next year," says Collins. "That will be followed by the hatch, which we're still trying to firm the timing, but will probably be early '17. The Type R will be after that; we're still not sure exactly when that, but it will be basically a three-stage launch of Civic half-way through '16 into '17."

Two engines will be offered; the carried-over 1.8-litre engine will power the entry-level Civic, but upmarket variants will score a new 1.5-litre turbo engine that we've already sampled in a Jade wagon around a banked high-speed test track at Honda's R&D Centre in Tochigi, Japan. The engine impressed with its refinement but healthy output.

"The whole priority is to provide a choice, and I think there are price-conscious buyers in that small segment that don't necessarily want high performance," says Collins. "But I've got to say that our number one priority was to bring the latest and greatest engine technology to the market. I think the 1.5 turbo will very much deliver on that. We haven't yet said what the mix will be between the two; it's still a bit early. But the whole point is to provide maximum choice."

According to the Honda Australia executive, the Civic could be the drawcard for Accord Euro owners now that the mid-size sedan has been discontinued.

"We're pretty confident that the new Civic, in both hatch and sedan, will fill some of that [Accord Euro] void. Clearly it's not a wagon, but we showed a group of our dealers the all-new Civic a couple of months ago – here in Japan at R&D [Honda's R&D centre at Tochigi]. Some of them were commenting that the sedan in particular might appeal to some of those Accord Euro owners. It's very much a sporty design.

Accord Plug-in Hybrid
Another car tried briefly at Tochigi, the Accord Plug-in Hybrid would be even costlier in Australia than the existing Accord Hybrid. Collins says that it's unlikely to reach Australia.

"We are still interested in what plug-in models are available, but it's certainly not in our immediate plan in the next couple of years. They're not currently building it in Thailand, but that doesn't preclude us from getting it. We can pretty much source it from anywhere in the world, as long as it's right-hand drive of course. It's on our radar, but it's not a major priority at the moment."

Clarity Fuel Cell
Hydrogen is not viable in Australia at this time. Honda has a 'Smart Hydrogen Station' (see below) that it plans to roll out around the world, just as Tesla is doing for its electric vehicles with its Supercharger stations, but Honda's plans for the SHS are geographically limited – and Australia appears to be outside the boundary. This makes the fuel cell vehicle a non-starter for Australia.

"No plan for it in the foreseeable future," says Collins. "I think it's fantastic technology; whether we could bring it in small quantities... maybe... but I think that's a little way off."

SHS (Smart Hydrogen Station)
Honda has developed a hydrogen refuelling bowser that could be effectively installed in existing service stations or as a stand-alone set-up, much like Tesla's superchargers, but dispensing hydrogen for fuel cell vehicles, rather than electrons for battery/electric vehicles.

"My understanding is [it's] very much [for] Japan and parts of America," says Collins. "I'm not sure about Europe. I would be very doubtful whether there's a plan to roll it out throughout Asia, so I think the focus is very much Japan and the US.

"The other Asian emerging markets have a lot of other priorities... so certainly Japan and the US – particularly California – is where it's going to be.

"It's something we'd certainly be interested in. There's a bit of water that would need to go under the bridge for it. It's great technology, and it's a showcase of what Honda can do in that space, so I think that's something we would be pushing for. We don't have a timeframe on it, but it's very interesting."

1.0-litre turbo Jazz
This engine was sampled in a Civic at Tochigi. It struggled in the small hatch, but might feel livelier in the lighter Jazz. Collins says that if we see the engine in Australia at all, it will most likely be in a light segment car like the Jazz or the City.

"I think logically the Jazz would be the car we would consider it for," says Collins. "We don't have a plan to introduce that engine in that car as yet, but we're just starting to work now on the next model...

"Whether we can... make the business case work, we'll have to wait and see, but that would be the logical choice.

Jade
A good option for Aussie consumers in the market for a small wagon, the Jade seats six, with the middle row comprising two seats with cinema-like armrests in the middle. It's a good drive and looks attractive too. But there's just no market in Australia for a car such as this, says Collins.

"It's a very nice car. Our priority has been over the last couple of years – and right up to today – is to make sure we get our core cars right. When I say 'core', it's Jazz, it's launching the new Civic really well next year, CR-V and HR-V. They're the four core cars. Then we have supporting models... and there's actually a very small market for those wagons currently. Question is can we create a market? It is a great product, and we are looking at everything that's available in other markets around the world. I'd never rule it out, but it's not currently in our plan.

"Jade's a good car; it's just that the market for those small wagons is so small – and for us that would mean it would be a supporting model, so that makes it hard."