Striking 'Accord' with Consumers? Honda's New Model
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Car manufacturer Honda (NYSE: HMC) is set to roll out new models of the Accord this week. The Japanese company is seeking to silence its critics after changes to their Civic model received harsh condemnation.
In launching the new Accord, Honda clearly is trying to avoid the kind of criticism it got for the Civic. Consumer Reports slapped down the new Civic earlier in the year and repeated the criticism in the September issue, putting the Honda model on a list of five popular cars to avoid. The magazine chided the car for a choppy ride, noisy cabin, and a mediocre interior, although it did cite its reliability and efficiency. Honda has been endeavoring to fix up the 2012 Civic because the competition has gotten better.
While Civic sales overall have not declined, the criticism has cost Honda in a different way. The Civic led all compacts in July 2012, selling over 25,000 cars. But Honda spent $1,550 per Civic on incentives to maintain sales, $250 above the industry's small-car average. Civic discounts were $350 higher than the Ford (NYSE: F) Focus, $450 more than General Motors’ (NYSE: GM) Chevy Cruze, and $1,400 higher than Hyundai's Elantra.
Honda has released only a few details about the 2013 five-seat Accord, which it will start manufacturing at a factory in Marysville, Ohio. The company says the Accord's fuel economy will be competitive with the Nissan (NASDAQOTH: NSANY.PK) Altima, and the price will be similar to the current Accord, which starts at $21,480.
We do know the 2013 Accord is planned to be a little smaller on the outside and bigger on the inside than the 2012 model. The downsizing of the Accord makes the car easier to steer and park, as well as boosting gas mileage by making it more aerodynamic.
"We need to see if Honda has learned from Civic and what they've applied to the Accord," says Aaron Bragman, an auto industry analyst for the IHS consulting firm.
Honda has consistently gone against industry trends by giving buyers the option of a V-6 engine. Fords and Chevrolets offer only four-cylinders in their new midsize cars. Honda reportedly will keep the V-6 engine option because of its smooth, powerful driving feel. The new V-6 will attain gas mileage rates similar to rivals' four-cylinder motors.
Honda is hoping that the new Accord will help boost its sales and its overall market position, as the sedan marketplace is quickly heating up. Nissan’s Altima leads midsize sedans in highway fuel economy at 38 miles per gallon, while a revamped Toyota (NYSE: TM) Camry has roared into first place in the United States as the best-selling car in America. A redesigned and lower-priced Volkswagen Passat, and a new, more efficient Chevrolet Malibu are currently available, while Ford’s new Fusion is coming out this fall.
The market is certainly shaping up to be a free-for-all, battle royal. Just five years ago, Honda’s Accord and Toyota’s Camry were locked in combat at the top, while the Nissan Altima lagged behind at a distant third. Now, fast-forward to today. The Accord and the Camry still lead, but the American, South Korean, and German rivals are upping the ante, steadily chipping away at the leaders’ sales numbers.
Midsize cars were the dominant car segment for decades among U.S. buyers, but then the midsize car sector saw its market share decline in 2009. The decline came about because consumers bought more compacts and smaller SUVs after improvements were made to both. The midsize segment is now starting to make a comeback, with market share in the United States at 18.6 percent, up around two percentage points from 2011.
Analysts have explained the recent rise in the midsize by saying that baby boomers are downsizing from larger vehicles. They are attracted to the roominess and fuel economy of the improved sedans. The Altima gets highway mileage that is just under the best compact cars. Versions of the Fusion and Malibu get 37 mpg on the highway, a mile per gallon less than the Altima.
So, will the new Accord turbo charge Honda? Glenn Mears, who owns Nissan and Honda dealerships around Dover, Ohio, seems to think so. He has seen the new Accord, and is betting it will live up to expectations. He is especially thrilled to have a new strong car to sell against rival dealers. "It should help me dominate my market," Mears says, "or at least get more of the market than I have right now."
The new Accord model will probably help Honda recover from the criticism it has faced over the Civic, and uphold its good reputation in the car industry. The new release will most likely help boost Honda sales. Overall, the new release will benefit the company as it moves forward, and will most likely “strike Accord” with consumers.
EvanBuck has no positions in the stocks mentioned above. The Motley Fool owns shares of Ford. Motley Fool newsletter services recommend Ford and General Motors Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. If you have questions about this post or the Fool’s blog network, click here for information.
