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Honda avoids industry’s ‘juice’

Automotive News John Mendel A few years ago fans and the media alike were mesmerized by the prodigious home run statistics in baseball. Now...

Automotive News
John Mendel

A few years ago fans and the media alike were mesmerized by the prodigious home run statistics in baseball. Now the sport is grappling with how to determine the relative value of home runs hit by players who used steroids.

Of course, when "juicing" came to light, fans felt deceived. Lost in all that were the reputations of a few great hitters who resisted steroids, only to have it suggested that they were losing their swing.

It's not talked about much in the press, but the auto industry has a similar situation today, with the heavy use of fleet sales to boost perceived sales volume.

I have no problem with any company's decision to bulk up its volume and keep its factories working by selling to fleets. As with the challenge of major league pitching, the competition in our industry is tough. So some feel the need to juice their sales to stay on par with those of us who do it strictly retail.

But I would argue that, as with steroids for baseball players, an addiction to fleet sales is not healthy for manufacturers or buyers. The dual pricing structure that drives fleet sales can negatively impact residual values. For customers, it undercuts the value of the products they purchase when all those fleet cars return to market as used cars. We don't think that is right for our customers. We have never done it, and we won't start now.

However, the news coverage of our industry seems to encourage the use of fleet supplements with talk of market share gains and hot brands, regardless of where the sales volume comes from. Automotive News suggested in a Page 1 story Dec. 6 ("The threat to Honda's mojo") that while American Honda's sales are up, it is somehow losing its momentum. Among the statistics cited in the article's faulty premise was the perceived failure of Honda to keep up with the market share gains of other companies. Some companies have monthly sales that include from 15 percent to more than 40 percent fleet sales.

But is selling 10,000 brand-new vehicles to a rental company the same as selling them one at a time to 10,000 individual customers?

Market share means, or should mean, just that: share of the consumer marketplace. Certainly, heavy fleet sales can bulk up a company's sales volume, but that is a fundamentally different measure from share of market.

At American Honda, we will continue to pursue sustainable sales strategies that are intended to reward the customer's decision to invest hard-earned money in our products.

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