‘Civic is just on fire,' helping to drive Honda sales surge

American Honda's sales blowout last month featured the usual suspects and a few surprise guests.

Honda brand's 20 percent sales gain, which put it back in the black after months of heavy sledding, was led by the CR-V compact crossover and its 28 percent growth vs. last year for a record 44,235 units. The bigger Passport crossover also posted a record, and the diminutive HR-V utility vehicle celebrated its best August yet.

But that's only half of the story, because car sales are the other half. With cars making up about 45 percent of deliveries across the mainstream Honda brand and luxury offshoot Acura combined, the Japanese automaker is finally reaping the benefits of its "cars matter" philosophy by pulling in market share from competitors that have shifted more of their focus to utilities.

The Civic family — with multiple body styles and trims — continues to be the star of the show at Honda. It's leading the compact car segment over the rival Toyota Corolla by nearly 20,000 units this year. The Civic enjoyed a 26 percent gain last month to 34,808 units. The CR-V, meanwhile, trails the Toyota RAV4 by about 35,000 units this year in the compact crossover segment.

Civic sales are not at the record highs seen just after the launch of the latest generation for the 2016 model year. But deliveries are 1.3 percent higher this year through August — a claim that only a few mainstream cars can match.

Other cars gaining last month were the midsize Accord, subcompact Fit and Insight hybrid. Overall in August, car sales rose 20 percent across Honda and Acura brands compared with a 16 percent gain for light trucks.

"Do people want passenger cars? Yes," said Steven Center, vice president of the auto sales division for American Honda. "Forty-seven percent of our sales are passenger cars [at Honda], and we're picking up share in the passenger car segment — almost two points compared to the other mainstream brands," he said in an interview.

And it's not just the exit of the Detroit 3 — mostly — from the car market. "We're also gaining from other Asian brands too, such as Hyundai. So, I think it's kind of from everybody," Center said. "As the market shifts more to trucks, those people that prefer passenger cars are coming to us in droves. Almost 20 percent of the passenger cars sold in America are Hondas. That is crazy."

It helps that the Civic comes as a sedan, coupe and hatchback in normal, pocket-rocket and track-ready versions such as Type R hatch. It's the top U.S. vehicle for first-time buyers, millennials and multicultural shoppers. "Civic is just on fire. And when you consider it's at the farther end of its life cycle, to be achieving such sales volumes is absolutely incredible," Center said.

Jessica Caldwell, executive director of industry analysis at Edmunds, said the Civic is a prime example of a car that has evolved amid the changing auto industry. It has outlasted several of its rivals thanks to a formula that remains important to a significant chunk of the market that is looking for simple transportation, but not too simple.

"Civic has successfully endured the market shift toward SUVs because there is still a strong demand for cheaper, basic transportation at a price point below small SUVs. Civic fills this niche with a reliable brand name that has been a standout in the segment for decades," Caldwell said.

"Since price-sensitive car shoppers are less likely to take financial risks, Honda's reputation for longevity and quality makes Civic a safer prospect," she added. "The largest source of sales comes from prior customers, so with high quantities of Civics sold throughout the years, the buyer base is massive and is only going to expand as other brands shutter their car lines."

While it's noteworthy that Honda's incentives rose 16 percent last month from a year earlier according to ALG, they remain among the lowest in the industry and the automaker does not participate in fleet sales like most of its competitors.

Honda brand's average incentive this year, according to Motor Intelligence, is $1,898 per vehicle compared with $3,520 at Kia, $2,057 at Toyota and $1,540 at Subaru.

Center disputed that Honda's incentives were higher in August on a per-vehicle basis, and said they are lower this year overall.

"We're being much more efficient about how we spend the money," he said. "Some markets are APR markets and so we focus on [interest rates]. Some markets are lease markets. We focus on that. Midmonth we take a look at our sales progress, and then we turn a little dial." When needed, that dial can be turned to reduce supply rather than rejigger incentives.

Honda knew that August had the potential to be a big month and was ready with a marketing plan to take advantage of the sales climate. The end of summer is traditionally used to clear out inventory for the model-year changeover, and Honda wasn't the only brand posting double-digit percentage gains with the help of the Labor Day weekend.

"I think all the stars lined up right," Center said. "We had the supply, we had the message, we had the offers and we had the market."