analysts suggest Honda’s problems extend beyond Europe market slump

Industry watchers expected Honda’s 2012 European sales to rise because of the addition of UK-built models such as the Civic and CR-V. Is Honda competing in the wrong market segment?

Last year Honda’s European volume dipped 6 percent to 141,019 and its share slipped to 1.1 percent, according to data from industry association ACEA. That was less than the market’s overall sales drop of 8 percent, but far from Honda’s peak of 311,743 sales in 2007, when it had a 1.9 share, according to ACEA data. 2007 was the last year Honda was profitable in Europe.

Honda is cutting jobs in the booming UK auto market because it says there are no signs that Europe’s car sales slump will end soon. Honda is cutting 800 jobs at the plant in Swindon, southern England.

The restructuring is essential to “meet the new reality of the car market,” executive vice president of Honda Europe Ken Keir said in a statement.

He said Honda expected weak sales in Europe over the next three years. In 2012, European car sales declined for the fifth consecutive year.

Analysts believe Honda’s problems go beyond the slump, especially since rival Nissan continues to add workers and production at its UK factory. In other words Nissan is doing something right and Honda is not.

In contrast to Honda, Nissan’s UK factory continues to grow. Last year, Nissan for the first time surpassed annual production of 500,000 in Sunderland, where it makes the Qashqai, Juke subcompact crossover and Note small minivan.

Late last year,Nissan announced plans to build the new Infiniti compact at the factory in northeast England. This will result in 250 new jobs being added to the 6,000-person work force and increase production by 60,000 a year starting in 2015.

Honda’s 2012 sales should have gotten a boost from the launch of an updated Civic compact and the all-new CR-V medium SUV, both built in Swindon.  In 2012, Honda sold 37,738 CR-Vs in Europe while Nissan sold 218,755 Qashqais, according to data from market researcher JATO Dynamics.
“The big marketplace for crossovers in the UK is sub-20,000 pounds (25,000 euros),” Norman said. “Honda is competing at 25,000 pounds, and there you’ve got Audi and BMW.”