Q&A: ERIK NELSON, HONDA DEALER ADVISORY BOARD

Honda aims to keep momentum going through 2014

Erik Nelson
Age: 52
Dealer since: 1998
Dealership: Lynnwood Honda, Edmonds, Wash.
Average monthly sales: 140 new, 85 used
Quote: "There's a lot of great product out there and a lot of great options, and ever since 2008 I think people are very conscious of their budgets and the value of their dollar. I think that'll be the ongoing challenge."
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After its second-best U.S. sales year, American Honda Motor Co. hopes to carry that momentum through 2014.

A redesigned Honda Fit subcompact and a Fit-based crossover arrive this summer, and Honda has committed to launch the second-generation Ridgeline pickup in about two years.

And dealers still have a fresh portfolio of the Accord mid-sized sedan, CR-V compact crossover and Civic -- which is scheduled to get a major update this year -- to help propel sales.

Erik Nelson, a Seattle-area Honda dealer and the recently elected chairman of the Honda Dealer Advisory Board, spoke with Staff Reporter Ryan Beene about how Honda dealers fared in 2013 and what lies ahead this year.

Q. How was 2013 for Honda dealers?

A. Overall it was a very good year. Inventories were better and more balanced. There was pricing pressure, but volumes were up around the board.

The new 2014 Accord was a big part of that. There was some pricing pressure impacting gross margins overall.

What major issues do Honda dealers face in 2014?

I just think it's the ongoing pricing pressures, from the Internet and competition from other brands, competition between dealers.

There's a lot of great product out there and a lot of great options, and ever since 2008 I think people are very conscious of their budgets and the value of their dollar. I think that'll be the ongoing challenge.

Are Honda dealers making money on new-car sales?

Some are and some aren't. That's a choice for each every individual dealer. There's definitely some pricing pressure and downward pressure on gross margins that everyone has to deal with.

Did Honda dial back on stair-step incentives in 2013? What have they said about stair-steps for 2014?

As a whole, they do use the stair-steps when necessary, because, frankly, it works, but they know dealers hate it. They really haven't said what they're going to do in 2014.

The Accord, Civic and CR-V have been redesigned in the last couple years. That's a long way to carry your three top-volume products in a market that's becoming increasingly incentive-driven. How will Honda keep those products fresh?

The new Accord is still fresh, at least going into 2012. There's no issues there. And with the Civic, we're getting some significant technology upgrades on it, so that's going to support that vehicle quite nicely, I think. CR-V has always been popular, and we're not really seeing a decrease in demand, so going forward into 2014 I definitely think we're going to be in good shape.

What are your thoughts on the new Fit-based subcompact crossover? Has anyone actually asked for a car like this?

What we are hearing is, "Where's the replacement to the Element?" I haven't seen this vehicle personally yet. I've just seen the pictures and read about it and talked to people about it, but I think that with the size and what they're delivering, it'll just fall into that subcompact crossover segment that the CR-V is one step above. For a lot of people, the size and the pricing of that car will be an attractive package.

People are asking for an Element replacement? That's not something you might expect, given its sales.

You know, that car was never as popular as the day they announced production was going to be stopped. It definitely has its following, and it's a great car.

Honda has plans for turbocharged powertrains in a number of its upcoming vehicles. Have you driven any of them?

I haven't. The only one I've heard full on about was the Japanese version of the crossover, the Vezel, and that it was coming to the U.S. market with the turbo engine.

Any thoughts about the name?

(Laughs) I was glad to read that they were selecting something else for the U.S. market. I'm sure it's wonderful for the Japanese market.

Honda said in late December that it would be coming out with a second-generation Ridgeline. What are your thoughts about that vehicle?

We're looking forward to it. It's nice to know they're committed to that vein of the Honda business and they're putting the development costs behind it to stay in the market.

What else have they told you about the vehicle?

Not a word.

How has that vehicle performed in your store in terms of sales?

It's done very well. It's just been a phenomenally long lifecycle. It was impacted by the tsunami and the development of the new Pilot, so it kind of got pushed aside. But the people that have them love them. It's a wonderful vehicle. I don't sell a lot of them, but they're not producing many. I think 2013 production was about 18,000 units for the nation.

We sell what we get. They're popular in the Northwest, and people that have them are wondering what the future potential replacement will look like and what features it will have because they'd like to stay with Honda.

Has Honda Division said anything about whether it will ever sell another sports car? Not a sporty car, but a sports car?

There's been discussion about that halo product. They've not committed one way or another as far as committing to go there. But they have with the NSX for Acura, and the dealer body would like to see [a Honda sports car], and we're hoping they will come forth with that and we've asked them to. We'll have wait for the corporate decision on that.

We have asked for an S200-like halo car for the Honda lineup, whenever Honda might find that to be appropriate.

Were they receptive to that?

They indicated that they would be open to it, but we have not gotten firm answers back yet. The best thing to say is that they haven't said no.

With Honda chasing its 2-million-unit sales goal for Honda and Acura divisions combined, what does the factory need to do to help dealers hit that goal?

Deliver great product. The new 2014 Accord is a good example of what can happen to volume and customer acceptance when you launch a phenomenal product. Between new product launches and product upgrades, that's how we're going to get to those goals, through the quality of the product itself.

Will more growth come from the segments where Honda is already biggest like mid-sized sedan and compact car or from smaller, more niche segments?

It's going to be a combination. They have to have the foundational trio of Accord, Civic and CR-V and strong sales in the Odyssey and Pilot, as they have been in their segments.

The new Fit that's coming out in April will have a jump in production and availability and then the all new model, the subcompact crossover is coming, too. So I really think it's going to be a combination of our core vehicles plus better overall sales pace on the noncore product.

What's missing in the product lineup?

It's just the truck replacement, and fortunately it's coming. It's a nicely balanced overall product lineup.

Is there anything new happening on the facilities front?

No. I think Honda has been really consistent through their three generations of their facilities and dealers have participated. They have very few nonupgraded facilities left in the country, fortunately, and we're thankful that they're not out touting some next-generation facility. They recognize that dealers have made a significant investment. They have been very reasonable on their facility demands.

How's Honda's certified used-vehicle business?

It's good. Honda's program has been at the forefront of the industry since they launched it. They continue to enhance it, and it's been a profitable part of our business, and it's up nationally. It's been a good program, and I think consumers respond to it well.

Are there any ways Honda could improve the program?

One of the things is just availability of more product. Just getting product back in the hands of the dealers through lease returns and other things like that to have more product available.

Is Honda being aggressive with getting more lessees back into their showrooms? Many brands expect a big jump in lease returns this year.

Honda isn't pushing hard on any type of pull-ahead programs, but they are very good about having ongoing contact with their lease customers, guiding them on their next purchase decision and reaching out to them early.

Many dealers have various products in store to track equity positions and pull those customers ahead. Honda's focus is to get those lease returns back through the system and back to the dealers and not have them go out into the general auctions.

What are Honda dealers doing to attract more service business, and is the factory helping?

The biggest initiative we currently have is to expand on our express service offerings, and have more capacity in-house in the express service lane as opposed to more traditional service techs.

Honda is supporting us with that through marketing and developing some marketing pieces and making them available to the dealers to promote express service.

Time is really the most valuable asset that any customer has, and we're trying to find ways to honor that and get them in and out of the facility faster.

How well is Honda doing with its digital marketing offerings, from national, brand-level work all the way down to the local dealer level?

I think they're doing well. They continue to put more resources behind digital and more people on it.

Their advertising group change that they did in 2012 helped that. There's more continuity between mainstream advertising and digital advertising. As they've made the changes with the [regional dealer] ad groups, they've made their contributions larger.

I think the ad groups have gotten more sophisticated, and now we're at a point where we're trying to coordinate that so we're not buying the same sources and the same key words to make us more efficient.

So Honda is now contributing more to its dealer advertising groups?

The contribution by Honda into the ad groups increased in 2013, which made more funds available to dealers, and I think that allows the groups to be more effective digitally, especially the smaller groups.

Has Honda's social media work been effective?

Yes, I believe so. Honda's got a great story to tell as a corporation with things they do with students, student athletes and their green initiatives.

They use that opportunity in social media to tell that story and not just be a company selling cars.

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