It’s been a fascinating year for the compact car, as all six of the segment’s leading competitors brought out new or updated models over the last 18 months. But as our Chart Of The Day shows, the competition has hardly sent the segment into overdrive, as after an early-year boom, compact car sales have slackened considerably. Intriguingly though, Honda and Toyota, which lost sales early this year due to supply interruptions in the wake of the Japanese Tsunami, seem to be the only brands with recovering compact sales. What’s especially interesting about this is the fact that Toyota’s modest refresh and Honda’s poorly-received new Civic were once widely considered by automotive pundits to be under threat from the resurgent competition. Indeed, Honda’s Civic has been especially hard-hit by media criticism, earning a harsh review from TTAC’s Michael Karesh, losing its coveted “recommended” rating from Consumer Reports, and engaging in some ugly media-bashing. But now that the Civic seems to be one of the only compacts to enjoy a late-year sales rebound, Honda’s announcing that it will be upgrading the Civic for the 2013 model-year, just one year after the new model was introduced.
Tetsuo Iwamura, Honda’s top North American executive tells Bloomberg that
Civic is a good product; of course the expectation of the marketplace for Honda product is quite high. We have to once again make it great. The gap between Civic and the competitors has been narrowed. We have to once again make the gap wider.
Honda has not yet announced any specifics about its planned 2013 upgrades to Civic, preferring instead to let Sales VP John Mendel hammer home the relative nature of Civic’s fall from grace. Mendel tells Bloomberg
We disagree with [Consumer Reports]. Did they make some points? Yes they did. We haven’t gotten worse, everybody else has gotten better. Where we used to be four or five laps ahead in the race, there’s more people on the same lap with us.
Moreover, Honda’s execs argue that inventory levels, not product weaknesses are the cause of relatively low Civic sales, as Bloomberg reports
The company has about 117,000 models in inventory, or a 41-day supply, less than half what it should have, Iwamura said.
“Hopefully, by the end of March next year” Honda will have full inventory, Iwamura said. “If John could sell more, then it will be the end of April or May.”
Honda has set a target to increase U.S. sales of its namesake brand to 1.25 million models next year, from about 1 million this year, Iwamura said. It plans to boost sales of its Acura luxury line by 43 percent to 180,000 from about 126,000 this year, he said.
“It looks like quite a high jump, but because of the availability problem we had a really low year this year,” Iwamura said. “That is the reason why growth looks huge, but for us, it’s a natural growth.”
Of course, there are a few problems with this line of reasoning. First, and most obviously, why is Civic receiving an “upgrade” after one year on the market if there’s nothing wrong with it? Second, since when is an 80+ day inventory ideal? Wasn’t this industry supposed to be moving away from the stack-em-high-and-sell-em-cheap ethos? Inventory levels may be a convenient scapegoat for weaker-than-hoped-for sales numbers, but financial results in this industry are closely tied to keeping those inventories from running out of control. And considering Civic is one of the only compact cars showing signs of recovery in recent months, it seems that both the upgrade and the professed need for a skyrocketing inventory may not be as necessary as Honda now seems to think. In any case, we’ll see how Honda’s upgrades affect the quality of the Civic, and we’ll be watching this segment closely to see how this brutal competition pans out…