Honda Canada Inc. will drive back into the competition in the most important segment of the Canadian vehicle market -- and one where it had its initial success -- with a new entry-level car in the 2006 model year, executives of its parent company announced yesterday.
"Our [North American] customers have long been demanding a car in the class below the Civic," Honda Motor Co. Ltd. senior managing director Michiyoshi Hagino told reporters in Japan yesterday. "By 2006, we believe demand will be even stronger and this new car will be a necessity."
Honda president Takeo Fukui said the "entry-level car" will be priced at less than the Civic. The base-model Civic with a five-speed manual transmission carries a manufacturer's suggested retail price of $16,100 in Canada.
Industry sources said Honda Canada has been testing a version of its Japan-made Fit subcompact car (sold as the Jazz in Europe) and some small sport utility vehicles in Canada for several months.
The Fit/Jazz could potentially be the car, Honda Canada senior vice-president Jim Miller said yesterday -- but not necessarily.
"We need to be competitive in the market with some of the other entry-level vehicles," Mr. Miller acknowledged.
Entry-level vehicles are crucial because first-time buyers eventually want bigger and more expensive vehicles as their incomes and possessions grow and they begin to raise families.
"It is critical that companies have a product positioned in that segment," said Dennis DesRosiers, president of DesRosiers Automotive Consultants Inc. in Richmond Hill, Ont.
The entry-level segment, which includes subcompact and compact passenger cars, small pickups and some minivan and sport utility vehicle models, amounts to about 40 per cent of new Canadian vehicle sales annually and could grow to as much as half the market in the next few years, Mr. DesRosiers said yesterday.
"If you can reach a student or a recent graduate at an entry-level price with Honda quality, it should be a success," said a sales manager at one Honda dealership in Ontario.
Honda becomes the third major auto maker to jump back into a market that Japan-based auto makers dominated in Canada in the 1980s and early 1990s, but wandered away from as they increased the size of such mainstream offerings as the Civic and the Toyota Corolla.
Subcompacts were crucial to the initial success of Honda when it began selling cars in Canada in the 1970s, Montreal-area dealer Norman Hebert said yesterday.
"In a market like Quebec, entry-level cars are a critical part of any manufacturer's success in the marketplace," Mr. Hebert said.
The move up in size by Honda, Toyota Motor Corp. and others in the 1990s allowed South Korean-based companies Hyundai Motor Co. and Kia Motors Corp. to dominate the subcompact car segment in the early part of this decade.
Their success, in turn, sparked General Motors of Canada Ltd. to jump back in and Toyota Canada Inc. to overhaul its small-car strategy in Canada.
Toyota now sells a version of the European-built Yaris called the Echo.
Its sales as of the end of June represented 24 per cent of Toyota's total sales in Canada.
GM is selling subcompact and compact cars made by its GM Daewoo Automotive and Technology Co. division in South Korea.
The auto maker has sold 7,247 Chevrolet Aveo subcompacts and 6,277 Optra compacts so far this year. The cars went on sale late in 2004.
The success of those cars has "proven how much pent-up demand there is in this segment," Mr. DesRosiers said.
© The Globe and Mail
Only GlobeinvestorGOLD combines the strength of powerful investing tools with the insight of The Globe and Mail.
Discover a wealth of investment information and and exclusive features.
