“It’s a very, very short-term tactic,” Mendel said, “especially in the subprime area, because you not only are pulling sales forward, you’re probably pulling people out of used cars into a new car that maybe they can’t afford.”
Mendel said the U.S. market began shifting last year and is now “near the top,” with sales on pace to reach at least 16.2 million units this year. He said annual sales of 16.5 million is “probably a good assumption” for automakers to use in their near-term planning.
His comments, perhaps the strongest warning from a top U.S. auto executive this year, echo concerns from several analysts as the U.S. industry’s seasonally adjusted, annualized selling rate neared 17 million in recent months.
“The U.S. auto cycle has clearly moved from a ‘need to buy,’ to an ‘I just want to buy’ type of consumer mindset,” Morgan Stanley analyst Adam Jonas wrote in a July 29 report. “There is a dark side to all this.”
Jonas recently estimated 130 percent of North American light-vehicle production capacity that was taken out in the most recent downturn will come back online by 2016 -- putting more pressure on industry sales, incentives and profits.
Mendel said Honda remains focused on retail sales, even if that means suffering a loss of overall U.S. market share as competitors ratchet up fleet deliveries in an improving economy.
“In addition to a heavy reliance on fleet sales to boost volumes, we are seeing some of our competitors adopt short-term tactics to stoke sales, like big jumps in subprime lending and 72-month terms. We have no desire to go there,” Mendel told reporters on a conference call today. “Our strategy is working. We’re doing what we need to do. We’re delivering great value to the customer.”
Through July, Honda’s U.S. sales are down 1 percent in an overall market that has expanded 5 percent.
The company says the drop in its U.S. sales also reflects the delayed launch of the redesigned Honda Fit hatchback and Acura TLX sport sedan. Both models were first scheduled to go on sale in the first half of 2014.
Meanwhile, American Honda’s incentive spending, including the Acura brand, is up 19 percent overall; At the Honda division, incentive spending has spiked 27 percent per unit, and 55 percent for the brand’s car lineup, according to Autodata.
Mendel said the higher incentives were primarily related to “affordability and price-point reasons,” including changes to make leases more attractive.
Honda said four of its nameplates were the top-selling vehicle in their segment, on a retail basis, in the first half of the year, just as they were in 2013.
Accord, CR-V gains
The Honda Accord is the year’s top car and the CR-V is the top utility vehicle, Honda said, citing its own analysis of U.S. new-vehicle registration data from IHS Automotive, which bought R.L. Polk & Co. last year.