Honda will raise incentives in the U.S. to a record level this year to spur sales of Pilot sport-utility vehicles and other aging models amid higher gasoline prices.
The average incentive to dealers per vehicle in the U.S., Honda's most profitable market, will rise to $1,000 this year from $950 a year earlier, Chief Financial Officer Fumihiko Ike said in an interview with Bloomberg Television in Tokyo yesterday.
Honda is trying to get rid of unsold vehicles before bringing out new versions of the Pilot and the Acura TL and TSX sedans in the U.S. Honda expects profit in its current quarter to drop as a weaker dollar reduces its repatriated earnings from the U.S.
They should be able to maintain their ground there and see growth in other regions to offset at least some of the yen's strength,'' Andrew Phillips, an analyst at KBC Securities Japan in Tokyo, who has a "buy'' rating on the stock, said in an interview with Bloomberg Television.
Gasoline prices near $3 a gallon and an economic slowdown tied to the subprime mortgage crisis may push overall U.S. auto demand to the lowest in a decade.
With higher incentives, the company aims to reduce inventories in the U.S. to between 45 and 60 days of supply, Ike said. Some dealers currently have as much as a 70-day supply for some models. Honda's U.S. incentives per unit are lower than the industry average of $2,500, according to Ike.
Concerns about the subprime mortgage loan crisis are weakening confidence among consumers in the U.S.,'' Ike said. This is happening at the same time we have already expected a weak year due to our model cycle.''
Rising demand for the Fit compact and CR-V small SUV will help raise U.S. sales this year, Ike said. Honda's U.S. sales may rise 2.5% to 1.59 million units this year, according to its plan unveiled on Dec. 19. Honda forecast industry wide sales in the world's largest auto market may fall to 15.9 million vehicles from 16.1 million in 2007.