Japanese Auto Makers Post Surprising Sales Gains in September

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Honda Motors (NYSE:HMC) and Toyota Motors (NYSE:TM) reported strong growth on a year-over-year basis in unit sales in the U.S. car market in the month of September. Both Japanese automakers benefited from a strong trend in SUV sales in the United States. Below, we take a look at the sales numbers for both companies in more detail.

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Trucks Lead The Way For Honda

Both Honda and Toyota have been coping with a major trend shift in consumer preferences in the U.S. As gas prices have been low, sales of crossovers and SUVs have continued to gain, as longtime sedan buyers turn to SUVs. However, Toyota and Honda have both previously relied on sedans for most of their sales and did not traditionally have SUV-based lineups. But in 2015, sales of the best selling models of both companies- Accord for Honda and Camry for Toyota were down over the first eight months of the year. Sales of Accord fell 20% in August and close to 15% for the first eight months of the year compared to the same period in 2014.  Other traditionally strong models for Honda, the Civic and Fit, have also suffered with sales for the former down by 6% and the latter down 30% (both comparisons for first 8 months). Company wide sales fell 6.9% in the month of August.

However, Honda’s unit sales in the U.S. rose by 13% in the month of September. [1] The gains were driven by sales of Honda’s crossover SUV and minivan. Truck sales of Honda and Acura grew by a combined 26.9% on a year-over-year basis in the month of September. [2] Sales of Honda’s crossover SUV CR-V have outpaced Accord sales so far this year and the trend continued in September too, with a 26% year-over-year gain. [2] Additionally, sales of the bigger Pilot SUV grew by 31%, while sales of Acura’s crossover RDX grew by 19%. [2]

Surprisingly, after struggling for a number of months, Honda’s sedan Civic also showed growth with sales up 27% in September. [2] However, this might just have been an effect of a clearance sale as dealerships looked to clear out their inventories in anticipation of the launch of the 2016 version of the Civic. The 2.1% gain in sales of Accord might also be attributable to the same factor. The 2016 Accord isn’t going to entirely new but there are a number of new features in the new model, including a new grill and several changes to the structure and suspension. Honda offered generous incentives on sales of both cars as it looked to clear out the last units of the 2015 versions of these models from its inventories in September.

Sedans Drive Toyota’s Gains

Meanwhile, Toyota’s sales grew by a solid 16.2% in the month of September. [3] The surprising thing about Toyota’s gains, however, was that all three of its sedans reported strong double-digit percentage growth. Overall, passenger car sales for Toyota grew by 19% in September. Sales of the company’s hybrid Prius grew by 12.4% for the month. [4] This is surprising because for the first eight months of the year U.S. sales of the Prius had been down by 17%. To some extent, this decline is attributable to low gas prices and rising sales of SUVs, which have made it harder for makers of hybrids and plug-ins to convince consumers to pay a premium for hybrid cars. Sales of General Motors’ plug-in Chevrolet Volt and Nissan’s all-electric Leaf have fared even worse than Prius over the past year. Toyota’s September gains might have been driven by the fact that a 2016 version of the Prius is on its way and the company offered incentives to clear out the last units of the older version from its dealership lots. The 2016 version of the Prius is significantly different from the older version in terms of driving dynamics, styling and luxury features. Its shape bear a strong resemblance to Toyota’s fuel cell vehicle Mirai. Moreover, the new version of the vehicle is the first Toyota car made on its new Global Architecture, a modular set of designs that the company hopes will reduce costs and improve reliability as the company moves more of the models across its portfolio to it.

Unlike the Prius, the 2016 version of the Camry is hardly any different from the 2015 version, but sales of the sedan were still up by 21% for the month. [4] Year-over-year gains in unit sales for sedans have been hard to come by across the industry as consumers have migrated to the purchase of crossover SUVs. Toyota has managed to capture a large number of those customers too- sales of the midsize Highlander crossover grew by almost 18%; RAV4 sales grew by close to 19%; and Toyota Sequioa sales grew by 26%. Moreover, sales of Lexus SUVs grew by 36%. Lexus wide sales grew by close to 16%. [4] These trends should help boost profitability for Toyota considerably in the coming quarter.

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Notes:
  1. Trucks Drive Numerous American Honda September Sales Records , PRNewswire, October 2015 []
  2. Ref: 1 [] [] [] []
  3. Toyota Division Remains Retail Sales Leader in Third Quarter, Toyota, October 2015 []
  4. Ref: 2 [] [] []