Honda Motor Co. is seeking to boost supplies of its CR-V following a sales spurt that propelled the small sport-utility vehicle past Ford's Explorer to become the top-selling SUV in the U.S.
Honda, Japan's second-largest automaker, is reviewing CR-V production plans at its plant in East Liberty, Ohio, said Ed Miller, a Honda spokesman. CR-V sales have climbed 42 percent to 64,591 this year following a redesign in late 2006.
Sales of the CR-V, developed from the frame of Honda cars, are rising as near-record U.S. gasoline prices and shifting consumer tastes have damped demand for bigger, truck-based SUVS. Most notable among them is Ford Motor Co.'s Explorer, which had been the best-selling SUV in the U.S. for most of the past 15 years. This year, it's No. 4.
Honda “hit the market with pinpoint accuracy with the new CR-V in terms of design, styling, powertrain and fuel economy,'' said Michael Robinet, an industry analyst at CSM Worldwide Inc. in Farmington Hills, Michigan.
Toyota Motor Corp.'s RAV4, another small SUV about the size as the CR-V, has climbed to No. 2 in U.S. sales this year. Ford's Escape is third. All are built on car chassis.
The CR-V is 15 inches shorter than the Explorer, 2 inches narrower and about 1,000 pounds lighter. The Honda averages 26.3 miles per gallon in combined city and highway driving; the Explorer gets 17.5.
The CR-V is also priced less, with a base model ranging from $20,600 to $26,000, depending on options such as two-wheel- or four-wheel-drive. The Explorer's base price ranges from $25,995 to $32,400.
`Clearly Tumbled'
“That category of traditional SUVs has clearly tumbled from its height,'' Ford sales analyst George Pipas said in an interview. In 2002, about 3 million traditional, truck-based SUVs were sold in the U.S., he said. “It will easily be less than 2 million this year,'' Pipas said.
Small SUV and crossover sales in the U.S. grew 15.2 percent through April to 893,441, while mid-size and large SUV sales fell 8.8 percent to 564,417, according to Autodata Corp.
The CR-V's success has challenged Tokyo-based Honda's production system. The carmaker initially planned to sell only 160,000 CR-Vs in the U.S. this year, spokesman Sage Marie said.
If the current pace holds, CR-V sales may exceed 180,000 this year, he said. That would be 13 percent more than Honda had planned and a record for an SUV made by an import brand.
Since March, Honda's East Liberty plant has built an average of 180 CR-Vs a day. It also assembles Element wagons and Civic cars.
Production Change
“This is a very a flexible facility, and the potential exists to do more,'' spokesman Miller said. “That gives us the option of reacting more quickly to meet a change in the market.''
The ability to make more CR-Vs at East Liberty was also increased by Honda's addition of a second Civic production line in Alliston, Ontario, said Robinet and analyst Catherine Madden, who tracks auto industry production for Lexington, Massachusetts-based Global Insight Inc.
“They're building up production of it here, but from a short-term perspective Japan will supply a lot of the additional units,'' Robinet said.
Honda also announced plans in March to assemble 50,000 CR-Vs a year in El Salto, Mexico, from kits made at East Liberty. Mexican production starts in September, Honda's Marie said. Half of the plant's output is to be sold in Mexico, with the rest destined for other Latin American markets and the U.S.
`Hot' Model
“CR-V production will go up over time, but Honda's going to raise it carefully,'' said Robinet, who based his forecast on discussions with company officials and suppliers. “Vehicle supply is a very tenuous balancing act for Honda.''
CR-Vs stay on a dealer's lot an average of just 12 days, compared with 28 days for a RAV4 and 68 days for Ford's Escape, according to J.D. Power and Associates.
“That's an exceptionally short period,'' Tom Libby, a J.D. Power analyst, said in an interview. “To say CR-V is a hot model is an understatement.''
Weighing Factors
The company, whose U.S. headquarters is in Torrance, California, weighs factors including exchange rates, shipping and supplier costs, as well as the prospects of long-term demand, before committing to production changes, Robinet said.
“For now, they'll flex up the Japanese side of the production chain while assessing the situation in North America,'' Robinet said.
CR-V sales have averaged 16,225 a month so far this year; at that rate, Honda could sell almost 195,000 in 2007. Under the current production pace, Honda may get 40,000 CR-Vs from East Liberty and the added output in Mexico.
Global Insight's Madden said Honda may try to boost North American production to more than 67,000, increasing that to 100,000 next year after a new Civic plant opens in Greensburg, Indiana.
Honda's Miller declined to say how many CR-Vs the company plans to build in 2007.
Honda's American depositary receipts rose 67 cents, or 2 percent, to $34 as of 4:21 p.m. in New York Stock Exchange composite trading. Ford shares rose 13 cents to $8.37.
