Honda gets its mojo back ahead of schedule

The Honda brand is in the midst of a swift recovery from a pandemic and chip shortage-related sales slump and is on track to close 2023 with sales of 1.2 million vehicles now projected.

"We expected at this point to be up around 25 percent, so we are growing past that," Lance Woelfer, Honda brand's sales chief, told Automotive News.

Last year, with microchip shortages still causing widespread production interruptions, Honda sold 881,201 vehicles. In 2019, the last full pre-pandemic year, the brand sold 1.5 million.

But through the first eight months of this year, Honda volume is up 30 percent with sales of 757,375 vehicles, according to the Automotive News Research & Data Center. And it closed August up 56 percent compared with August a year ago, well ahead of the industry's estimated growth of 17 percent.

It is enjoying a tailwind of having redesigned key models in its portfolio for 2023, including the Accord sedan and the Pilot, CR-V and HR-V crossovers.

The Japanese automaker was heavily impacted by production delays and supply chain problems and struggled to get inventory to dealers throughout 2022. It closed 2022 down 33 percent.

Honda is not out of the woods, but it's effectively navigating the circumstances, Woelfer said.

"The industry as a whole is still dealing with issues, including rail car shortages and logistics challenges in Mexico and Canada," he said.

Honda projects that the market as a whole will close 2023 at 15.7 million vehicles. It's unknown, Woelfer said, when the industry will be able to return to annual sales of 17 million vehicles.

"There was so much we had to do to get there; it was a different market," he said, reflecting on pre-pandemic sales levels. The auto industry closed 2019 with sales of 17.1 million vehicles, down just 1.8 percent from17.3 million the previous year.

But some analysts have concluded that the retail market is starting to contract, as macroeconomic headwinds, such as rising interest rates and elevated transaction prices, continue to sideline buyers. A resurgence in fleet sales is helping fuel growth.

Woelfer does not see a softening of the retail market, but he said most segments are still undersupplied. The average Honda dealership has been operating with fewer than 10 days of supply of new vehicles, and Woelfer expects that level will be the reality through the end of the year.

"I do not see the dealers building inventory on their lots because the demand is there and they're selling what we are able to provide," he said.

The industry is "below its potential," but the market is solid, Woelfer said.

"Fleet has come back, but retail is still strong," he said. "And over the coming months, Honda can still gain momentum and build share."

He acknowledged that consumers are adjusting to higher car prices.

"The biggest challenge we're dealing with is that consumers were in an environment where incentives were much more aggressive, and now higher interest rates raise the overall payment," he said.

To mitigate that, Honda has built its incentives around keeping owners within the Honda ecosystem.

"The focus is to make sure loyal Honda customers have the easiest time moving into a new car," he said.

Honda also has streamlined some of the packaging in its newer vehicles to make sure customers still have options that meet their needs, even if it doesn't satisfy all their wants.

"There very well may be some consumers who just can't get the same trim level, and it may not be everything that they had in the car before," he said.

"A focus for us is making sure that we don't create overcomplication, and make sure we've got a trim that will see the demand and give customers the options that fit their needs."