Business – Faced with the crisis, Honda is playing the card of transparency and price increases – Used HONDA

ECONOMIC CRISIS

Faced with the crisis, Honda is playing the card of transparency and rising prices

Business - Faced with the crisis, Honda is playing the card of transparency and price increases - Used HONDA

In front of the main representatives of the motorcycle press, the CEO of Honda France made an uncompromising point of view of the difficulties of the motorized two-wheeler sector, in a global economic context affected by an unprecedented recession since 1945…

To hell with the language of wood! The speech given to a handful of motorcycle journalists on Friday by the CEO of Honda Motors South Europe (France) was marked by a concern for transparency particularly notable at a time when the world economic situation is deteriorating at high speed…

Harley-Davidson severely
affected in the United States

Hit hard by the crisis in the United States, the famous American manufacturer had to lay off nearly 12% of its workforce and reduce its production by 10 to 13% due to a 30% drop in its 2008 profits (read ).

"In 33 years of work I had never seen this", deplores, in an interview given this weekend to New York Times, Spuck Bennett, 79, Harley-Davidson dealer in Ocean City (Maryland): after selling 280 motorcycles in 2007 and 200 last year, his priority today is to "just try to survive"by reducing costs, in particular by laying off seven employees out of 49.

"Harley-Davidson’s core customers are baby boomers whose hair is turning white and whose savings, in many cases, have gone up in smoke with the financial crash", analyzes the famous New York daily, noting that today,"few of them are in the mood to put out $ 20,000 for something that is ultimately just a big toy"… But Harley has not yet really succeeded in renewing (and therefore rejuvenating) its clientele, young Americans have so far been more attracted to Japanese brands – which is not enough to stop the drop in sales of Japanese manufacturers across the Atlantic…

Because while a report by the International Monetary Fund (IMF), published on the eve of the next G20 in London, forecasts a recession for 2009 – the first since World War II – hitting the developed countries hard (between -3 and -3.5% in total including -2.6% for the United States (see in particular our box opposite), -3.5% for the euro zone and … -5.8% for Japan) , the fears of Jean-Luc Mars seem indeed to say the least well founded…

Currency fluctuations, yen / euro parity, prices of raw materials and maritime transport, cash flow, turnover: the atmosphere of this "crisis breakfast" was more like a crisis management seminar than a panegyric of the last model intended to supplant all the others, more generally of setting in this type of meeting.

A situation more serious than it seems…

"My job has changed since October", Jean-Luc Mars immediately noted:"I was a marketing man to develop Honda, today I am a manager to avoid a disaster. Today we are in a race against time for survival"…

Contrary to an idea still fairly widespread in public opinion, the world economic situation is indeed on a particularly slippery slope..

Return to 2005 levels
on the French market

Evolution of motorcycle registrations (125 cc and more) in France

  • 2004: 183,811 registrations
  • 2005: 196,618 registrations
  • 2006: 229,364 registrations
  • 2007: 238,966 registrations
  • 2008: 237,695 registrations
  • 2009 (*): between 180,000 and 200,000

(*) Honda forecast

In France alone, where the government continues for the moment to pretend to believe in a "1.5% negative growth"for 2009, INSEE now expects a drop in GDP of -2.9% over the first half of the year (instead of the -1.1% announced so far, compared to the drops of -0.9% during of the 1993 crash and -1% in the 1975 crash).

This regression should naturally be accompanied by a sharp rise in unemployment (330,000 job losses planned during the first half alone against 90,000 for the whole of 2008), each company having to reduce its costs for see a possibility of straightening the bar after the storm.

Faced with this unprecedented recession in the world market, it is difficult to see how the motorized two-wheeler market would escape a general decline in demand: with only two advantages in their game (the fall in the cost of raw materials and the plunge in that of maritime transport), the manufacturers, who for the most part already recorded in 2008 a very clear reduction in their profits, anticipate as best they can a year 2009 that economic observers already qualify ashorribilis : a new round of price increases after those of this winter (read in particular and for Honda, for Suzuki, for Kawasaki and for Yamaha) therefore appears inevitable in an attempt to save the furniture…

For Honda, Jean-Luc Mars has decided to play fair by announcing from the outset a new price increase of around 7% on average per model (see our table below), in addition to that of + 2.9% on average recorded in February (read) but which should, "except major economic disaster", be the last for 2009.

And in accordance with what he had announced live to our readers (read our), this upward trend in the price of new motorcycles and scooters has every "chance" to be followed again by other manufacturers, at less Japanese.

Anticipate the reactions of bikers

Anticipating the complaints of bikers attentive to their purchasing power (probably read your comments below in a few minutes, knowing that the fastest are not necessarily the most enlightened …), Jean-Luc Mars however specifies that today ‘hui, the builders "are not putting their pockets full but trying to get out"(also read our box on Harley-Davidson severely affected in the United States above)…

Also anticipating the – legitimate – questions of our readers on what could appear as a lack of consistency between the increases which follow a recent period of discounts, the French manager of the global giant explains in substance that the priority this winter was to return the maximum cash, by removing stocks as quickly as possible from motorcycles already purchased at a very favorable exchange rate (and therefore leaving a good margin of maneuver). But from the moment when stocks are absorbed, the motorcycles bought at less advantageous conditions must be sold by saving all that can be: "we go from a logic of cash to a logic of "no loss" (I’m not even talking about profit) to stop the bleeding", explains the CEO.

Supporting graphics, the big boss of Honda Moto in France also recalls that the current prices of motorcycles are significantly lower than they would be if we had simply applied inflation:

The Hypersports War

For now, in the Hypersports segment, the Kawasaki ZX-10R remains relatively well placed at 13,949 euros including tax ahead of the Suzuki GSX-R 1000 K9 which is showing at 14,299 euros including tax (+ 4.% Compared to the 2008 model): this is the "official price of the bike for the moment and there is no question of making it suffer any increase to date.", assures us Suzuki France … As for the Honda CBR1000RR 2009, it is displayed for a few more days at 14,490 euros including tax before going from April 1 to 15,690 euros including tax (+ 8%), joining the range of the new Yamaha R1 2009 which is currently trading at 15,290 euros R1 but could also be revalued soon…

Not to mention that with the downward trend in the new home market over the last months of 2008 and the beginning of 2009 (read our), dealer inventories tend to increase more than due..

Profits in free fall

And who says overstock says discounts to sell the goods, which is neither good for the image of a manufacturer, nor for the good understanding of the "fair price", nor for the second-hand market … so much so that today, a manufacturer prefers to run out of motorcycles (and therefore lose sales) than to have too many…

Like other Japanese manufacturers who have already reported a sharp decline in 2008 results, Honda (which ends its financial year on March 31) expects its 2008 profit to decline by around -85% to 1.2 billion euros … Which naturally remains a pretty tidy sum for the good fathers of families that we are all more or less but which, on a global industrial scale, means nothing other than a dramatic drop in the bottom line…

"Special good news" box !

Positive vibrations ! In this particularly gloomy context, the most optimistic will still have noted that as their grandmother said, who was always right, after the rain comes the good weather. It remains to be seen when, but it’s a certainty.

In the meantime, we can already note two good news in this ocean of crises:

  • First, the increases announced by Honda – and which, it should be remembered, have every "chance" to be followed very soon by other manufacturers – will only take place on April 1: with the first rays of sun, it is an excellent reason to rush home to take advantage of the current rates.
  • In addition, with prices rising for new models but almost stable parts and accessories (+ 3% announced at Honda), the second-hand market will automatically skyrocket: the opportunity (uh uh) to realize very good deals thanks to the timeless ones, especially as Honda will extend its new financing offer to: instead of 3.9% for new vehicles, the offer is 4.9% for used Honda vehicles and 6.9% for second-hand from other brands.
  • The objective for Honda – which has "never been in deficit in 60 years", recalls Jean-Luc Mars – today is no longer just to make profits but"avoid losses in 2009/2010".

    The winged manufacturer, which is now counting on a 2009 market of between 180,000 and 200,000 units depending on the scenarios (compared to the 240,000 units in 2008, see our box above and our), is therefore preparing to play the market share card to the detriment of volume: by selling 30,000 machines this year on a total market of 190,000, Honda could increase its market share by 2 points to 16%, compared to 33,108 sales in 2008 on a total market of 240,000 units representing 13.9% of the market share.

    But given the gravity of the situation, the end of the crisis (end of 2009? End of 2010?) Could lead to deaths among manufacturers of motorcycles and scooters, because the market is today in a logic of concentration: in cars by example, the number of manufacturers has been in free fall for several years.

    "No automaker can be certain today that they will still be here in two years", estimates Jean-Luc Mars who has not yet confirmed his presence at the next Mondial du deux-Roues, Porte de Versailles from October 2 to 8, 2009, no more than other major players in the motorcycle world in France…

    Eric MICHEL

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