TOKYO -- Honda Motor is tackling its domestic sales slump, the product of a series of major recalls, with a new top-of-the-line sedan.On Monday, the Japanese carmaker revealed a revamped version of its flagship Legend luxury sedan, the car's first facelift in two and a half years. It is the company's first new model for any line since the release of its Vezel SUV in December 2013.
CEO Takanobu Ito said the new Legend incorporates as much state-of-the-art technology as possible, making it the most advanced gasoline-electric hybrid vehicle around. It is due to hit the market on Jan. 22.
The company positions the Legend as a rival to German luxury autos, including Mercedes-Benz, and Toyota Motor's Lexus line, which also feature top-notch driving performance and fuel efficiency.
The new Legend will sell for 6.8 million yen ($58,747), about 2.3 million yen less than a similarly equipped Benz E-Class and about 500,000 yen cheaper than a comparable Lexus GS.
Bouncing back
The revamped model is just the beginning of Honda's efforts to stage a comeback. The automaker has been struggling for some time due to a series of recalls of major models, including its mainstay Fit compact car. Following these recalls, Honda temporarily suspended the release of new models during this fiscal year. At the same time, its competitors have been enjoying robust sales thanks to the weaker yen.
Honda currently plans to release around five new domestic offerings by spring, followed by the launch of the high-performance NSX sports car in fiscal 2015.
But Honda has some serious ground to make up. Its domestic unit sales for fiscal 2014 are expected to shrink to around 930,000 cars, well short of the projected total of more than 1 million.
The company's performance has also been disappointing in certain overseas markets, including China, where Honda has lowered its sales forecast by 100,000 units.
Moreover, the company's profitability has been slow to recover. The operating margin for Honda's four-wheel division stands at 3.9%, far lower than the 9.5% of Toyota, 7.2% of South Korea's Hyundai Motor and 6.2% for Volkswagen of Germany. The figures for Hyundai and Volkswagen are for the January-September period.
In short, Honda is expanding production even though it is not making a profit. Some sources within the company say this is partly due to the midterm plan specifying a unit-based sales target.
Tied to a number
Under the plan, which was announced in 2012, the carmaker set a goal of selling 6 million cars worldwide in fiscal 2016, up 50% from the level in 2012. With its apparent focus on economies of scale, the plan was seen as a change of policy for Honda.
However, Honda's unit-based growth was limited to the domestic market for minivehicles and compact cars and low-price car markets in other Asian countries. Sales of minivehicles and compact cars represented more than 80% of the company's domestic sales, but these models have low profit margins.
At Monday's press conference, Ito said Honda can still hit its unit sales target, if everything goes well. But, he continued, the company intends to focus more on quality than quantity, with its top priority on customer satisfaction. In other words, Honda has effectively shelved its 6 million goal.
At Monday's press conference, Ito said Honda can still hit its unit sales target, if everything goes well. But, he continued, the company intends to focus more on quality than quantity, with its top priority on customer satisfaction. In other words, Honda has effectively shelved its 6 million goal.
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