Acura: Honda's way of aiming for upscale American drivers
Under the glare of a noonday desert sun, the fleet of new Acura Legend coupes was drawing a stream of curious onlookers at the posh resort hotel. ``What are they?'' asked one guest. ``I don't know,'' responded another, adding ``I don't even know how to say the name.''Skip to next paragraph
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``It's one of them new Japanese cars,'' chimed in a third, ``I bet it has something to do with their culture, or something.''
They were right on at least one point. The new cars were Japanese, the latest model to be introduced by Honda Motor's Acura luxury division.
As to the name, frequently criticized since the line debuted a year ago, it is actually the invention of a United States research company, meant to convey the concept of precision and accuracy.
Acura has been trying hard to overcome confusion over the division's name as it celebrates its first, generally successful birthday.
When it was introduced in the spring of 1986, Acura was setting precedent. Though American manufacturers have long offered cars from several divisions, this was the first time any Japanese company had taken that approach. It was also the first time a Japanese carmaker was making a foray into the luxury market dominated by such US nameplates as Cadillac and Lincoln and importers Mercedes-Benz, BMW, Volvo, and Saab.
Initially, Acura dealers had only two cars to offer: the sporty, $10,000 Integra and the sports luxury $20,000, four-door Legend sedan. Still, while that obviously left some major gaps, Acura officials say they were careful to target two of the fastest growing market segments.
``These segments will account for about 3 million sales [a year] through the 1990s, up from less than half that figure in 1980,'' says Thomas Elliott, Honda of America's senior vice-president of marketing.
The new, two-door Legend coupe is designed to fill in another niche for Acura. At $22,000 to $26,000, depending on options, the vehicle is aimed at college-educated managers and professionals with sizable disposable income who like their cars to stand out from the crowd. These buyers have shunned domestic luxury automobiles for more stylized European imports.
In fact, when asked to list those vehicles they feel the coupe will compete with, Acura officials do not mention any US nameplates. And by its styling, too, the coupe makes no bones about who, or what, it is going up against.
``There clearly is a resemblance to a BMW ,'' says Cliff Schmillen, head of Honda's US sales operation. ``We're not going to put BMW out of business,'' but the Acura division, he says, is clearly taking much of its business away from European imports.
The majority of Acura's buyers have traded in Hondas, but ``our next highest trade-in is the Audi, then BMW, Mercedes, and Volvo, in that order,'' Mr. Schmillen adds.
By the end of 1986, Acura had sold 53,000 vehicles, about evenly divided between Legend sedans and Integras. That was several thousand short of initial sales goals, but a number of dealers did not open their stores on time. The real test comes this year, with Acura aiming to double its volume to 105,000. The company ended last year with approximately 100 dealers and hopes to reach 300 by late 1987.
``Our sales forecast is ambitious,'' says Acura division vice-president Ed Taylor.
But ``I think they've got a good shot of making that goal,'' says William Pochiluk, chief analyst for Autofacts Inc.
The move by the Japanese into more upscale products comes as no real surprise in the face of the shifting dollar/yen balance, which has forced that country's automakers to raise prices by roughly 20 percent over the last 18 months. In turn, that is making it more and more difficult for the Japanese to compete in the low-end segments of the market, especially against the new ultra-low cost products now being imported from countries like Mexico, South Korea, and Brazil.
In the sports luxury market, however, price seems to make little difference. Mercedes and BMW have suffered few ill effects from the price hikes they have ordered to compensate for an increasingly valuable mark.
For those who do consider price when making their purchase plans, the Legend costs several thousand dollars less than the European models it is targeted against, such as the BMW 325e, 535, and 635 models, the Saab 9000, and the Mercedes-Benz 190 and 260 models.
As for the future, Acura officials plan to unveil another new model by 1990, Schmillen says. They are now deciding whether to go with a model priced midway between the Legend and Integra, or what Schmillen describes as ``a true sports car,'' along the lines of the Porsche 944. He and other Honda and Acura executives tend to favor the sports car.
Acura models are now being built solely in Japan, while an increasing number of the vehicles sold by the flagship Honda division are produced at a factory in Marysville, Ohio. Honda is deciding whether to expand that US assembly line or add a second, entirely new factory. In either case, ``When we have one extra line, one Acura model may be built here,'' says Tetsuo Chino, chief of Honda's overall North American operations.
In fact, Mr. Chino says Honda may go one step further. Currently, about 80 percent of the Acura division's worldwide sales are in the US, and if either the Legend or Integra are built here, that assembly line likely would be used to supply overseas demand.
Honda already is exporting its Accords from Marysville to Taiwan, but this would be the first time an American assembly line would be the sole worldwide source of a Honda automobile.