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The Honda brand experiences a strong recovery in sales
The Honda brand is on a swift recovery path from the impacts of the pandemic and chip shortage-related sales slump. It is now projected to close 2023 with sales of 1.2 million vehicles, surpassing initial expectations. Lance Woelfer, Honda brand’s sales chief, stated, “We expected at this point to be up around 25 percent, so we are growing past that,” (Automotive News).
In 2020, Honda faced production interruptions due to microchip shortages, resulting in the sale of only 881,201 vehicles. Prior to the pandemic, in 2019, the brand sold 1.5 million vehicles.
Strong sales growth in 2021
Despite the challenges faced, Honda’s volume has increased by 30 percent in the first eight months of this year, with sales of 757,375 vehicles, according to the Automotive News Research & Data Center. In August alone, Honda recorded a significant 56 percent growth compared to the same period last year, surpassing the industry’s estimated growth of 17 percent.
Honda’s success can be attributed to the redesign of key models in its portfolio for 2023, including the Accord sedan and the Pilot, CR-V, and HR-V crossovers.
The Japanese automaker faced production delays and supply chain problems throughout 2022, leading to a 33 percent decline in sales. However, Honda is effectively navigating the current circumstances, but challenges still remain. Woelfer stated, “The industry as a whole is still dealing with issues, including rail car shortages and logistics challenges in Mexico and Canada,” (Automotive News).
Market expectations for 2023
Honda projects that the overall market will reach 15.7 million vehicles sold by the end of 2023. However, it remains uncertain when the industry will return to annual sales of 17 million vehicles. Woelfer reflected on the pre-pandemic market, stating, “There was so much we had to do to get there; it was a different market,” (Automotive News). In 2019, the auto industry closed with sales of 17.1 million vehicles, only a slight decrease from the previous year.
Analysts suggest that the retail market may be contracting due to macroeconomic factors like rising interest rates and elevated transaction prices. However, fleet sales resurgence contributes to overall growth.
Woelfer believes that the retail market is not softening, but most segments still face supply shortages. Honda dealerships, on average, have less than 10 days of supply for new vehicles, a trend that is expected to continue until the end of the year. He added, “I do not see the dealers building inventory on their lots because the demand is there and they’re selling what we are able to provide,” (Automotive News).
Honda’s position in the market
Woelfer emphasizes that while the industry may be “below its potential,” the market remains strong. He stated, “Fleet has come back, but retail is still strong. And over the coming months, Honda can still gain momentum and build share.” Consumers, however, are adapting to higher car prices due to reduced incentives and increased interest rates.
In response to these challenges, Honda focuses on keeping loyal customers within the Honda ecosystem, offering incentives aimed at facilitating the transition to a new car. Additionally, Honda has streamlined its vehicle packaging to ensure customers have options that meet their needs, even if everything they desire is not available. Woelfer highlighted the importance of avoiding overcomplication and providing trim levels that align with customer demands and options.