Acura’s future was so dire four years ago that Honda began killing models and choking off product development. Now, Honda is putting $1 billion into its luxury brand, a perennial also-ran to Toyota’s Lexus line.
Honda’s latest attempt to give Acura purpose is a parade of new products, including the flagship RLX sedan, an MDX sport wagon and the return of the NSX super sports car, priced above $100,000. Its goal is to tailor Acura to the tastes of the U.S. buyers it covets.
The product push this year comes after Acura’s U.S. sales have fallen 25 percent from a peak of 209,610 in 2005. Though Honda was the first Japanese automaker to sell a luxury car in the United States, Acura never reached the peaks of Toyota’s Lexus line, the top-selling luxury brand in the United States from 2000 to 2011. Acura has never captured the cachet of German luxury cars, forcing Honda to sell its upscale models on the cheap.
Acura’s “biggest negative is we are known as a value company in the premium space,” Mike Accavitti, Honda’s U.S. marketing chief, said. “What we have to do from a marketing perspective is ramp up the emotional element.”
Honda’s effort to elevate Acura shows how important — and competitive — the luxury segment has become for carmakers worldwide. Luxury sales have increased as the U.S. economy has improved and upscale cars provide generous profits and prestige that serve as a halo over an automaker’s entire model line.
Luxury autos account for 12 percent of global sales, “but are almost 50 percent of industry profits,” Johan de Nysschen, president of Nissan’s Infiniti luxury line, said.
Honda shares have jumped 50 percent since Nov. 14 as the yen has weakened in foreign currency exchange. Even so, investors are willing to pay a smaller premium for Honda’s revenue compared with BMW’s sales than they have for most of the past decade.
Four years ago, Honda’s then-president, Takeo Fukui, reviewed the expansion plans for the lagging luxury line. At the time, Acura’s U.S. sales were plunging by almost half, to 105,723 in 2009.
So Fukui scrapped plans to create an Acura dealer network in Japan. He killed development of a new NSX model with a massive V-10 engine. He also canceled plans to emulate German luxury cars by outfitting Acuras with V-8 engines and rear-wheel-drive vehicle platforms.
Now, Acura won’t chase the money in emerging markets such as China. Instead, it will try to restore Acura’s credibility as a technology leader in the U.S. and finally emerge from the near-luxury bargain basement.
Acura “will remain a U.S.-centric brand,” John Mendel, Honda’s U.S. sales chief, said.
Honda, known for efficient product development, is overhauling Acura’s lineup for what some automakers could spend on one model, said analyst Rebecca Lindland.
“If they can revamp the lineup for $1 billion, that’s money well-spent,” Lindland said.