Why Honda Is Stepping Up Its Efforts To Produce More SUVs In The U.S.

-12.59%
Downside
37.12
Market
32.45
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HMC: Honda Motor logo
HMC
Honda Motor

Honda Motor Co. (NYSE: HMC) is changing its production mix in the U.S. to sell more SUVs and Crossovers. This would signal a change in the Japanese auto maker’s image, which has traditionally been known for the best selling sedans Civic and Accord. Over the 2015-2016 period, the breakdown in passenger car sales and light truck sales has gone from 45-55 in the favor of the latter group to 41-59. Moreover, Honda’s SUV CR-V has become the highest selling SUV in the U.S. auto market, selling close to 320,000 units through the January-November period. The vehicle has now become the second highest selling vehicle for Honda in the U.S. auto market, outpacing Accord sales. Additionally, as we wrote recently, the vehicle’s growth was capped at 1.6% in 2016 because of production constraints.

The company is now looking to address these issues by raising production for SUVs and Crossovers in the U.S. Early in 2017, the company will shift the production of the Acura MDX Crossover from its Alabama plant to its Ohio plant, freeing up capacity for greater production of the Pilot crossover, Odyssey minivan and Ridgeline pick-up truck. Additionally, the Japanese auto maker is shifting production of the CR-V from its Mexico plant to its Indiana plant to free up capacity for more production of the subcompact crossover HR-V.

hmc suvs

As you can see from the table above, the combined sales of these vehicles have grown by 4.2% in 2016 through the January-November period, compared to the 0.1% overall growth in the car market. This should help the company boost its profits going forward.

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com

2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Honda Motor

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