Saturday, June 28, 2014

Honda trips in China with 'mistake' Accord

All set for some more automotive news? We have a great short article today that you should actually read. Stay up to date with all automobile related info and automobile transportation news right here.



Honda's sales in China rose 11 percent in the first five months of the year, about in line with overall auto-sales growth in the country, powered largely by less-expensive models.

Ma Jie

Yuki Hagiwara

Bloomberg

June 28, 2014 - 12:01 am ET

TOKYO -- Honda Motor Co. was so confident the new Accord would be a superstar in China last year that it released an exclusive 3-liter version with a flashy grille and a price tag to rival Volkswagen AG's Audi A4 luxury sedan.

The results weren't so stellar.

Deliveries of the vehicle that Honda predicted would drive its revival in the world's largest automobile market fell 37 percent in the first five months of this year.

The Accord -- which until three years ago was the top-selling midsized sedan in China -- dropped to as low as No. 9, in April, as VW's Passat and Magotan models took the top slots.

In late February, Honda pushed out a stripped-down Accord that started at about 180,000 yuan ($29,000), compared with more than 200,000 for earlier versions. Sales still sagged. \

"We've already lost faith in it," said Liu Yefei, who runs a Honda dealership in Shanghai. "Honda tried to focus on the higher-end version from the beginning, but they underestimated people's desire for German cars."

The Accord's struggles illustrate the challenges Japanese automakers face nearly two years after Chinese protesters torched Honda and Toyota Motor Corp. dealerships and damaged Japanese-branded cars amid a territorial dispute.

While sales have rebounded among lower-priced Japanese cars, German brands have strengthened their position among high-end models.

Rows of Audis

German cars enjoy a unique cachet in China, where it's common to see rows of black Audis -- China's top-selling premium brand -- parked outside government agencies or state-run enterprises' offices.

As German brands have introduced more affordable models, the sales of mid-sized Japanese sedans have slid further, dealing a blow to Japanese makers that have counted on mid-sized sedans to be big moneymakers in China.

"Accord is having a tough time being sandwiched by premium brands and the lower-end brands," said Koji Endo, a Tokyo-based analyst with Advanced Research Japan.

Because the Accord is one of the most profitable models in China, he said, its slump could affect Honda's earnings.

"To make money, they have to sell more Accords," he said.

Honda spokeswoman Akemi Ando said the Accord models recently introduced in China were "a bit expensive" at first. "With the launch of the cheaper 2-liter version, you will see our sales rebounding in the next one or two months," she said by telephone.



The Accord's struggles illustrate the challenges Japanese automakers face nearly two years after Chinese protesters torched Honda and Toyota dealerships and damaged Japanese-branded cars amid a territorial dispute.

Misjudging customers

Seiji Kuraishi, the managing officer for Honda's China business, said in April that the company had sought to compete with European and U.S. carmakers.

"We realized it was a mistake that we didn't understand customer needs well and didn't have anything below 200,000 yuan," Kuraishi said.



Overall, Honda's sales in China rose 11 percent in the first five months of the year, about in line with overall auto-sales growth in the country, powered largely by less-expensive models.

Honda's growth pace trailed that of Toyota and Nissan, and lagged Honda's own 19 percent full-year growth target. China sales are expected to make up 19 percent of Honda's global sales this year.

Five-year fall

Five years ago, the Accord, Toyota Camry and Nissan Motor Co.'s Altima -- called the Teana in China -- represented four of every 10 midsized sedans sold there, according to LMC Automotive.

By last year, as rivals like the Volkswagen Passat came on strong, the combined share fell to about two in 10. The Accord's market share fell to 6 percent last year, from 18 percent in 2008. Over the same period, the Camry's share declined to 9 percent from 16 percent. Nissan's Teana has a 6 percent share, down from 10 percent in 2010 and 2011.

"For people with a budget of 200,000 yuan, why would they stick with the Japanese when there are so many other options?" said Zhu Bin, a Shanghai-based analyst for LMC.

This year, Audi began selling its basic A3 for just below 200,000 yuan. Previously, only Audi's smaller A1 had been priced there. Zheng Fangbing, a 28-year-old Beijing resident who works for a securities brokerage, said price wasn't a factor when she chose a 260,000-yuan A4 over an Accord in February.

Beyond flash

"We chose Audi because the brand appears more 'gao da shang'," said Zheng, using slang that implies high quality rather than just a flashy brand name. "Also, we were afraid that if we buy Japanese, it would be smashed if anti-Japan protests broke out again."

When Honda brought the ninth-generation Accord to China last year, the company expressed confidence it could compete with the A4 and the VW Passat.

The new Accord would be a "blockbuster," Yu Liang, Guangqi Honda's deputy general manager, said at the time of the September rollout.

"It will become a superstar and a source to power Guangqi Honda's strong revival," Yu said, according to a news release.

The initial 2-liter version Honda introduced started at 206,800 yuan, exceeding the Camry's 180,000 yuan starting price and the Teana's 190,000 yuan. The 3-liter variant Honda unveiled for the China market went for as much as 298,000 yuan.

Honda put most of its focus on marketing an Accord with a 2.4-liter engine that WardsAuto selected as one of the best 10 last year.

Growth goals

In late February, Honda introduced a 2-liter Accord priced more in line with its Japanese peers. As of April, the latest month for which comparisons are available, 20,600 Accords had sold, compared with 53,200 Camrys and 40,900 Audi A4s. VW's Passat and Magotan had deliveries of 99,300 and 74,900, respectively.

Honda maintains its goal of selling 900,000 cars this year and doubling annual sales in China to 1.3 million units in the three years through 2015. It plans to introduce 12 new models during that time. Much of that will depend on the success of more affordable models such as the new Crider compact sedan and the Fit, introduced in late May.

Honda is seeking to regroup against the backdrop of a two-year diplomatic freeze that began after the Japanese government purchased three of the five disputed Senkaku, or Diaoyu, islands in the East China Sea. The dispute still colors consumers' attitudes about Japanese brands, said Liu, the Shanghai Honda dealer.

"This is not reflected on the surface anymore," Liu said. "But it affects people's decision when they choose a brand and this impact won't go away easily."

Contact Automotive News

http://www.autonews.com/article/20140628/GLOBAL03/306289998/honda-trips-in-china-with-mistake-accord

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