With Supplies Dwindling, Some Honda Dealers Foresee Long, Dry SummerThis affect you! All Honda owners and potential buyers need to read this article! Buying a Honda will become harder soon! Come to Northwest Honda today! Visit us at www.northwesthonda.com
As it works to restore production capacity lost after the earthquake in Japan, Honda announced delivery delays this week of some of its most popular and fuel-efficient models built in Japan, including the Insight, the Fit and the redesigned Civic Hybrid.
Though widely anticipated by American dealers, the news came as other automakers — particularly Hyundai, Kia, Ford and General Motors — were celebrating record first-quarter profits, largely on the backs of new, compact, fuel-efficient models whose continued production and delivery through the summer is all but assured.
Honda guaranteed that March-April orders would be fulfilled for May-June deliveries. Beyond that, the brand has described its ability to fulfill orders as “fluid.” Some Honda dealers, however, are already feeling an inventory pinch.
“We knew this was coming. Most dealers around the country would tell you the same,” said Carl Bellizia, owner of Cambridge Honda in Cambridge, Mass., of this week’s announcement. “It’s an unprecedented disaster, and Honda has done a marvelous job of communicating to the dealers. And we understand they cannot make guarantees.”
While his inventory of Hondas built in Japan is dwindling, Mr. Bellizia does not feel that the laws of supply and demand justify significantly higher prices for those models. “Of course, prices will go up to some degree, but our A.D.M.U. (Additional Dealer Mark-Up) has not been above 1 or 2 percent over M.S.R.P., and we’ve even discounted some of these models if we think a customer will return to us for service or future sales.” he said. “People have long memories, and we don’t want to gouge anybody.”
Rick LeMaire, the general manager of Largo Honda in Florida City, Fla., foresees challenges.
“We’ll be taking a lot of vacations this summer,” he said. “We have a rather large facility — six floors, with four dedicated just to parking inventory. But we’re already walking through a lot of emptiness.”
Largo Honda hopes to compensate for the shortfall with more sales of preowned cars. “But preowned sales are dependent on trade-ins,” Mr. LeMaire noted, “and without new cars to trade in for, the customer won’t necessarily be coming to the dealership.”
The success of small cars from Korean and American manufacturers comes at the expense of sales from Japanese brands, Mr. LeMaire said, as he recalled a recent conversation with a colleague in his auto group, a Nissan dealer.
That dealer, he said, had told him that the Hyundai dealers outsold the Nissan dealers by 46 percent last month in their region.
Dealers who project good stocks of Civics — nonhybrid versions of which are assembled in North America — can at least try to convince would-be hybrid consumers of the merits of the base compact car, which is rated by the E.P.A. at 39 miles per gallon in highway driving.
“Some people who come in and want a hybrid, they want it for the fuel economy,” said a sales representative at Fletcher Jones Honda in Chicago, who agreed to speak on the condition of anonymity. “But the hybrids cost more, so it may take five years for somebody who doesn’t drive much to see a cost benefit.” In such cases, the customer would be steered toward a Civic, the representative said.
Keith Rey, the general manager of Marin Honda in Corte Madera, Calif., says he is operating with healthy inventories of the affected models. “I think it would be news if we were running base supplies similar to the Toyota Prius, which always runs low — 8 to 10 days worth and that’s it — but we’re not in that position at all,” he said. “We’ll be down eventually, but that’s not going to change our business model.”
“Look back to Cash for Clunkers in 2009, when everyone was running low inventories,” he said, referring to the federal program that awarded rebates to motorists who traded in their cars for new vehicles. “We’re nowhere near those levels.”
Inventory shortages of the past, however, offer a finite number of lessons for dealers trying to adjust to an unprecedented calamity.
“When you’re so removed from the devastation, it can be difficult to think beyond the situation’s impact on you,” Mr. LeMaire, the south Florida dealer, said. “But this was exceptional in every way.”