In a rare move for a Japanese company, Honda admits that its export business is losing it money on the cars it builds in Japan and then sends to America.
Honda currently imports its smaller cars and hybrids; the CR-Z, Insight, and Fit account for a third of Honda’s imports, as well as some Acura models. But 85 percent of the cars it sells in America are built in America, a higher percentage than many other Japanese makes. This means that Honda isn’t hurting as much from the strength of the yen as Toyota and Nissan, which build just 70 percent of their lineups here.
“Under the current exchange rate of 80 yen per dollar, our export business doesn’t make any profit,” said Fumihiko Ike Honda’s Chief Financial Officer. “Definitely, the absolute number of exports to the United States will be decreasing.”
Honda is the first Japanese company to admit this. But it won’t pull these cars out of American dealers because it completes the company’s lineup, and its dealers need them: “We need to keep our customer base,” said Ike. “Especially last year because of the shortage of supply, American Honda didn’t have enough cars to sell.”
And most distressingly for Honda: it makes no money on sales of the Fit. Absolutely nothing.
Which is a shame. The Fit is aging, but it’s still a fantastic car and a bargain (much to Honda’s and Ike’s chagrin) in the segment. Demand for the Fit is strong enough in Japan that Honda is allocating few Fits to America. If it’s not profitable for Honda, it’s even less profitable for dealers, who lament the fact that its customers forget that Honda still builds small hybrids. In fact, in some perverse sort of silver lining, Honda’s expensive exports aren’t selling well: Fit sales in America fell by 33 percent in May, and the CR-Z and Insight are barely selling 3000-3500 units per month.
Still, Ike acknowledges that the Fit is important to attract customers into the Honda fold, including the younger ones that carmakers covet: ”we need to keep the customer base and demographics,” he said, “especially with hatchbacks for the younger generation. For them, it’s a very good car.”
And Honda is shifting production of the Fit to Mexico, as previously reported—and even in China, with the first Chinese-built Fits arriving to Canadian shores this year. This should alleviate the burden of production for the Fit and lower the company’s costs. Which is, need we remind you, a good thing—here’s to hoping that Honda will continue selling the Fit in North America for years to come, and even the next model. As for the hybrids? Yeah, we’ll take them too.
Source: Automotive News