What will drive that growth?
We see the growth coming from our new and refreshed products. But most importantly, our dealer body is re-energized as they are finally seeing products come in and can satisfy customer demand.
Are you seeing signs of recession this year? And how would Honda respond to worse economic times if they came in the next several months?
It seems like the pace of recessionary factors is easing, but it’s hard to speculate. The reputation of our product quality and reliability gives our customers peace of mind even during difficult economic times, and is something we believe will continue to benefit us as an organization. Customers are snapping up both Honda and Acura product now that we can meet demand, but we still need to keep our production target realistic and consistent with our new business strategies, which is [maintaining] low inventory and having dealers sell into their pipeline, and really run an efficient operation.
What kind of changes in consumer behavior are you observing in the post-pandemic world?
The American consumer is very emotional and wants to see the product and buy it right away, but COVID trained customers to be comfortable with placing an order and waiting for their vehicle rather than shopping from inventory in a dealer’s lot. To me that’s a big change.
What it does for us as an industry, and specifically for Honda, is help us to align our production more closely to customer demand, rather than dealers sitting on a 90-day supply that customers could pick from. Our dealers are now accustomed to preselling vehicles in their pipeline, which helps keep on-hand inventory low and [improve] our days-to-turn. We saw those at historic levels when we were going through our supply shortage.
We’ve also seen a shift in consumers wanting to start some of the purchase process digitally. We’ve had success with our reserve and deposit programs on the Acura side, which we can roll onto the Honda brand.
Which products or segments will Honda’s growth come from this year?
We will continue to work on growing our hybrid volume and light-truck sales. [We expected] CR-V and Accord hybrids to sell about 50 percent, but demand is around 60 percent. The Civic hybrid next year will further help grow our volume. Building the hybrid volume is part of our electrified strategy as we transition these owners to our future [battery-electric] models.
Pilot and Pilot Trail Sport are all new and leading our light-truck lineup and will continue to enhance our performance, as will strong output from Passport and Ridgeline.
We also continue to do very well with younger and first-time buyers to the brand. The new HR-V is leading the industry with first-time and Gen-Z buyers. And despite all our supply challenges, Civic continues to do very well with young and multicultural buyers.
What’s the plan to keep inventory flowing to dealers this year?
Like the rest of the industry, we’re cautiously optimistic in the sense that supply is improving, but we’re not totally in the clear. We’re working closely with our manufacturing team and suppliers to avoid the peaks and valleys we experienced last year, and to stabilize deliveries for our dealers and consumers.
Last year, we put measures in place to help achieve more stability, and we’re starting to see that pay off. Our manufacturing and supplier partners are becoming much better at recognizing potential issues, and activities like dual sourcing and development of alternative parts have helped us have a better product flow.
Beyond that we’re taking steps to strengthen our supply chain, including the supply of microchips recently secured by our global CEO, Toshihiro Mibe. Other tactics like preselling and reservations help us ensure that the right products are being allocated to our dealers and meet customer demand.
Last year, we saw renderings of smaller dealership lots. Is Honda still headed in that direction?
The new dealership design was really to provide dealers with a modular and flexible space that reflects each individual market, as well as the ways customers shop for and purchase vehicles. If we want to run an efficient operation, dealers need to support those types of activities.
And our new digital retailing tools will reduce the overall need for large physical footprints in markets where real estate is expensive, like New York, San Francisco or Los Angeles. Dealers see the benefit of this business model and they can operate a lot more efficiently and reinvest some of those savings into preparing for what’s coming next: electrification.
How is Honda addressing current affordability issues, and how will pricier EVs fit into the complex landscape?
Affordability continues to be a concern for the industry. Both Honda and Acura are committed to gateway vehicles like sedans and compact SUVs. We’ve also expanded our CPO programs — Acura Precision Used and Honda True Used — which both include 6- to 10-year-old vehicles and give buyers peace of mind when they purchase slightly older vehicles.
Also, ensuring that electrified vehicles are affordable is important for adoption down the road and we have taken steps for that. Our intention is to bring affordable EVs in 2027 and we’re putting longer-term resource circulation strategies in place that will lower the cost of raw material and make that business sustainable for battery production. This is also why the EV tax credit is an important tool for electrification — to make EVs affordable and spur adoption.
Has the uncertainty of the Inflation Reduction Act affected American Honda’s EV strategy?
Our strategy is to create and build EVs in North America — that has always been part of our plan. We announced a $700 million retooling of our existing auto and powertrain plants to establish our EV hub in Ohio and prepare for the production of batteries in 2025. The Marysville plant in Ohio, where we began auto production in 1982, will be the first plant in the U.S. to transition to making EVs.
Honda and LG, as a joint venture, have committed to invest $3.5 billion in a new, 2-million-square-foot EV battery facility to be completed in 2024. It will create 2,200 jobs and have 40 gigawatts of annual production capacity. We’ve done business in North America for 40 years and will continue to be a major player.
What are your thoughts about consumer adoption of the features-on-demand model?
The benefits of features on demand is that it provides flexibility for the customers. You can take a group of features that comes with a trim, only to get the one feature you actually want. You can utilize electronic devices such as a phone or tablet, and we will install hardware in a vehicle that will enable customers to access a new service that hasn’t been created yet. I think it’s worth continuing to go down the space and it’s an area that will give us an ability to explore ways of adding value. Value creation is what’s important throughout the ownership of Honda and Acura.
What is the status of Acura’s digital retailing tool?
The North Star here is to create a simple omnichannel digital retailing process that provides a seamless transition between environments, whether at home or at the dealership. The customers can choose how convenient they want the process to be. One hundred percent of the sales transaction will continue to be conducted thorough our dealer body, and that is very important. That is why we’re working hand in hand with our Acura Innovation Committee every step of the way. We are on track to have the platform sync with the launch of the ZDX early next year.
