Honda sets sights on US green car market

By Jonathan Soble in Tokyo
Published: March 12 2009 02:00

Honda Motor is to offer US drivers the first petrol-electric hybrid vehicle priced at under $20,000 as it seeks to draw recession-hit buyers away from the segmentleading Toyota Prius.
Honda's Insight, which will go on sale in the US this month, has already scored an early success in Japan, where 18,000 people placed orders for the car in the three weeks after it went on sale on February 6.
That was more than triple Honda's monthly sales estimate of 5,000 units, and came in spite of a drop in Japanese car sales of 24 per cent in February.
Honda published the Insight's US sticker price for the first time this week. At $19,800 for the basic model, the car will be $2,200 cheaper than the least expensive Prius.
The fully loaded LX model will cost $23,100, compared with $27,765 for the top-end Touring version of Toyota's car.
Honda, Japan's second-largest carmaker, has staked its reputation on the success of its hybrid programme, one of the areas it has spared from deep cost costs amid the motor industry slump.
The five-door Insight succeeds a three-door model of the same name which Honda discontinued in 2006.
Honda executives believed at the time that the pool of drivers willing to pay as much as $5,000 extra for a hybrid powertrain was too small, only to watch Prius sales explode as petrol prices hit record highs two years later.
"Honda absolutely cannot afford to fail with this car," Masatoshi Nishimoto, analyst at CSM Worldwide, a motor industry research group, said.
The company is targeting sales of 200,000 units a year once production hits full stride, with most demand expected to come from the US, the biggest hybrid market.
Honda hopes planned hybrid versions of several other models, including the Fit subcompact, will push sales to 500,000 units early in the next decade, a volume equivalent to about 10 per cent of its current production.
Honda has reduced costs by engineering a simpler version of the dual engine-and-motor system that powers the car.
The Insight is less fuel-efficient than the Prius, in spite of being a slightly smaller car, generating 41 miles per gallon of petrol according to its US specifications compared with 46 mpg for Toyota. A planned upate of the Prius this year is expected to raise its efficiency further, to as much as 50mpg.
But the Insight's lower sticker price is likely to attract buyers who have been forced by the recession to temper their green ambitions.
Even at the peak price of more than $4 a gallon, a Prius buyer would have to have driven a heroic 200,000 miles to earn back the price difference with the Insight through better mileage alone.
Copyright The Financial Times Limited 2009