Honda’s state of the nation

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Part of the recent Honda Canada get-together in Cape Breton was a talk by the company big cheese, Warren Milner, about the annus horribilis that is drawing to a close and the annus mirabilis that is coming next.

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Warren Milner says days of slashed prices are over.

Part of the recent Honda Canada get-together in Cape Breton was a talk by the company big cheese, Warren Milner, about the annus horribilis that is drawing to a close and the annus mirabilis that is coming next.

To put it bluntly 2010 has been a horrible year for the motorcycle industry as a whole (save for some of the Euro brands who seem to have done relatively well). Milner blames this on having too much stock in a world where the recession slashed demand.

The result? Pricing of non-currents was slashed (via promotions) and 2010 models were priced down to close any gap between U.S. and Canadian pricing to prevent bleeding of sales to the U.S.

According to Milner this has actually pretty much achieved its objective with old inventory almost sold off, and Honda seeing a return to the number one sales slot, but at a price: people started to view motorcycles (especially the Japanese brands) as something of lesser value.

And he raises an interesting point. How did the Euro brands manage to not only avoid the hardest part of the industry dip but actually manage to increase sales and profits? According the Milner, the Japanese have been battling on price whereas the Europeans have been battling on lifestyle and value – a mistake he also accepts blame for.

Now all this price-based battling might all sound good to you and me – cheap bikes, what’s not to like? But the cost has been a bare-basics sales model with little to no after-sales support and no money to go to supporting the sport and keeping the industry healthy.

To put it frankly, it’s an unsustainable model, and as Milner put it, the motorcycle business needs to become profitable again if it is to survive. Globally, the big four Japanese brands are all bleeding money and they’ve projected that this will continue for the next couple of years!

The good news is that Milner thinks they’ve hit the bottom with some encouraging signs such as a slight increase in recent sales in Canada.

So what will we see in 2011 from Honda? Don’t expect any more discounting, for starters. In fact the MSRP may even go up by a few percent. They’re also going to bring in a few more new models to try and fill some gaps.

For example, the CBR125R has proved to be a great seller and tool for getting the much needed young blood back into biking. The race series boasts a grid with 90% of the riders under the age of 16, and 30% women. This year at the Mosport round they even had more riders wanting to compete than they could fit on the grid.

But then Honda failed to ultimately capitalize, asking CBR125R buyers to make a 475 cc and $6,000 leap to a CBF600 when Kawasaki had a Ninja 250 for a mere $5,000.  This worked well for Kawasaki, with the Ninja 250 topping the street sales chart in Canada.

This is good news for those who fret that the industry is not doing anything to bring new blood into it, though rather frustrating for Honda who would like to see that new blood stay within the brand. Expect to see something to fix this in 2011.

1 COMMENT

  1. So two or three years ago Mr. Milner was in the press stating how the deep discounting era is over and the “Powerhouse Concept” would allow Honda to raise the prices as they would not be competing directly in the showroom with the competition. Once the old dealers were dumped, the prices were cranked, and nobody bought, he’s back to tell us that the deep discounting era is over (sound familiar?). How does this guy still have a job?????

  2. Yup, gotta generate some profit to pay for all those dealerships bought and/or expanded at the peak of the market. I can’t imagine strong 125 sales will make up for the cruiser cash cow years.
    One bright side to the downturn, I must say I enjoyed not being sneered at this year by my Honda dealer when I made my piddly little $150 parts order in the spring.

  3. They are listing shadow rs and phantom for 8500. A bit optimistic as lower mainland shops are bringing near-new 650 vstars in from the states at $5000.

  4. So Kawasaki’s 250R is the best selling Bike in Canada, followed by the Honda CBR125R? This should tell the North Am. motorcycle industry something right? Look to Europe and Asia to see the wonderful variety of smaller and mid-displacement Standards and Sport-Standards that are offered and bring some of ’em over here! Kawasaki’s introduction the Ninja 400R for 2011 is a good “next step” … c’mon HondYamaZuki, open your eyes and jump on the bandwagon!

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