American Honda Motor Co. Inc.'s recent growth spurt in the U.S. market has been somewhat overshadowed by the success of fellow Japanese competitor Toyota Motor Sales U.S.A. Inc.
But Honda steadily has climbed the market-share rung and now appears set to take flight.
Year-to-date through October, Honda held 8.3% of the U.S. light-vehicle market. If it can maintain that level through the end of the year, the company will see a gain of nearly one full point ahead of 2002's 7.4%, its current high. That would be the auto maker's highest 1-year gain since at least 1980, when its penetration rate was 3.4%.
Honda Odyssey minivan put sales back on course.
The secret to Honda's success lies in extending its passenger-car line to light trucks via innovative minivans and cross/utility vehicles. But those are segments where trucks are based on car or car-like platforms. Honda lacks what purists consider a real truck: a body-on-frame pickup, SUV and fullsize van.
Which begs the question: How much growth can Honda hope for in the U.S. without a so-called real truck?
Honda's market share was rising rapidly in the 1990s, when it was caught short as sales of light trucks, spurred by SUVs and large pickups, took off. The auto maker suffered a hit that took nine years to overcome. Market share dropped to 6.0% in 1992 from 6.6% in 1991, with another precipitous dip to less than 5.2% in 1993.
Since then, save one year, Honda's market penetration has increased annually, returning to its 1991 level in 2000. The emergence of the CUV segment and introduction of the ‘99 Odyssey minivan, which became a staple of the segment, put the company back on course. Also helping was the Passport midsize SUV, a rebadged Isuzu Rodeo built by Subaru of Indiana Inc. that was discontinued in early 2002.
Near term, Honda does have prospects for more growth.
Next year, the company is doubling capacity at its Lincoln, AL, plant to build more Odysseys and to add a new sport/utility truck (SUT) with a pickup bed. The additional capacity could contribute as much as 150,000 units to its annual sales.
Add to that the roughly 1.35 million anticipated sales this year and its market share could rise to 8.8% in the 17 million light-vehicle market forecast for 2004.
Long term, Honda should be able to sustain its momentum. However, without a body-on-frame vehicle — the SUT will be segmented as a pickup truck but will be based on the same unibody platform as the Odyssey — gains will have to come from current products or by filling niches inside segments the auto maker already competes in.
With no traditional truck products in the offing, Honda will be ignoring nearly one-third of the market. It could be betting that body-on-frame vehicles will decline over the years — indeed, they probably have peaked — and that buyers will shift to car-based trucks. The company also could be focusing on other markets for growth, including Canada and Mexico, where SUVs and pickups are less popular.
But Honda faces falling behind if it wants to become an all-around player in the U.S.
Toyota now competes with the Big Three in all pickup and SUV segments and is adding capacity for its products. The same can be said for Nissan North America Inc. following the rollout of its fullsize Titan pickup in December and Infiniti QX56 large-luxury SUV early this year.
Haig Stoddard is manager of industry analysis for Ward's Communications.
