New Honda Civic reflects brand’s push upmarket

Honda Australia has low expectations when it comes to sales of the new 11th-generation Honda Civic that goes on sale in December priced from $47,200 drive-away.

That’s not because the new 2021 Honda Civic is inferior to the 10th-generation model it replaces.

It rather reflects Honda Australia’s business transformation and consequent move upmarket.

Other models in the local Honda range will similarly sell in smaller, more focused product ranges as they flow through to the market in future.

They too will be subject to lower sales projections as a consequence.

The current Civic, which is sourced from Thailand, has sold 2749 units from the start of this year up to the end of October.

Way down from the sales figure for the same period in 2020 (5923), that number includes the run-out period and a month of supply constraints due to semi-conductor shortages.

But the new Civic is forecast to sell only around 900 units in its first nine months on sale. That’s roughly a third of the superseded model’s sales for the year to date.

The major reason for the new Civic’s modest sales projection is that Honda Australia wants to move the small hatchback further upmarket, where high-spec variants actually make money but the car sells in lower numbers due to what the industry calls ‘price elasticity’.

To put that in perspective, the basic Civic VTi reviewed less than 18 months ago was priced at $22,790 plus on-road costs.

The new Civic will cost buyers nearly $20,000 more, with the new model available in just one variant, which is equipped to a high specification. The new price does include on-road charges, of course.

And Honda Australia claims that this new model is markedly improved, citing the sophistication of the new continuously variable transmission as one example.

Honda Australia stands to make money (or save it) with this new business model. Instead of two different engines for the Civic, plus multiple trim levels, two different body styles and a pricing structure that is far from lucrative at the $22,000 mark, Honda can save money on homologation, for instance.

Parts logistics and servicing will also cost the company less, while Honda says that offering a ‘one-price’ formula – no haggling – has been well received by customers, without detriment to the bottom line.

All of this would offset a likely higher landed cost, the Civic now being sourced from Japan rather than Thailand.

The Thai factory builds Civic sedans for the Asia-Pacific region, but hatchbacks are much more popular than sedans in Australia.

Honda was compelled to buy right-hand drive Civic hatchbacks from the factory in Japan because that plant was the only one that could supply the Civic for Aussie buyers in the specification demanded.

Honda Australia Director, Stephen Collins, notes that for as much as any other reason, the Civic is being moved upmarket for more profit per unit, because the private hatch market sector in Australia is losing out to small SUVs.

“When we launched the 10th-generation hatch back in 2017, the private hatch market was 90,000 units nationally. This year, it’ll be 50,000. So basically, in five years the hatch ... market has effectively halved in nearly five years – to private buyers.

“I think what it shows is just the rapid change that is happening; although the total industry number is pretty stable, there’s still rapid change between obviously customers preferring SUVs, pick-ups and others, over and above the traditional sedan or hatch.”

As is the case with Mazda, the vast majority of Honda Australia’s customer base consists of private buyers.

Collins defended the continuing support for the Honda Civic in Australia. It’s one of Honda’s oldest model names and has iconic stature going for it.

“There’s a whole variety of reasons [for keeping the Civic in the local line-up],” he said.

“A couple of the prime ones are: we’ve sold over 400,000 Civics through the journey, and I think it’s very representative of our brand. It’s played different roles over different generations, and it could be that the next generation plays a different role again, depending on where we’re at and where the market’s at.

“It’s so synonymous with our brand that we’d never contemplate not having it.”

Speaking at the launch of the new Civic last week, Collins reiterated that the company now expects its annual sales volumes across the entire range will settle at around 20,000 units a year, with 90 per cent of those SUVs.

That’s a significant decline from the company’s results in 2018 and 2019 – over 51,000 and nearly 44,000 respectively.

Of the new forecast for 20,000 sales, Collins says that the remaining 2000 or so will be passenger cars, including the Civic.

“It’s more about going more upmarket in our product offering ... and very much focusing on new Civic, of course, but SUVs will be a big part of our business going forward,” he said.

Apart from losing market share in Australia, Honda is shrinking globally as well, with the company ending production at the Swindon plant in the UK, where the Civic Type R was being built.

The Honda Odyssey people-mover also faces the axe, with the Japanese plant that produces the family wagon scheduled to close early next year.

So with a contracting product range – Jazz was discontinued because it was no longer competitive on price in a market sector where Chinese brand MG is now beginning to dominate – and Korean brands now outsell most of their Japanese rivals, there was only ever one way Honda products could move in terms of pricing and specification – and that was upwards.