Honda's BIG Plans for Hybrid Sales

I found a nice article from Business Week online;

by Ian Rowley

TOKYO - With a solid lineup of small cars and superflexible factories that can quickly shift from SUVs to subcompacts, Honda Motor (HMC) has prospered lately. In June the Japanese automaker saw its sales jump by 14% even as its biggest rivals slumped.

But Honda's satisfaction with its results is tempered by the knowledge that they might have been far better if the carmaker had gotten its hybrid strategy right. While the company was the first major automaker to offer a hybrid in the U.S.—the Insight, introduced in 1999—Honda's efforts have long been overshadowed by Toyota Motor's (TM) success with the Prius. Honda misread what customers wanted, acknowledges research and development chief Masaaki Kato. As a result, the company has sold just 277,000 hybrids to date, compared with Toyota's 1.5 million. Honda stopped making the two-seat Insight in 2006 and last year ditched an unpopular Accord hybrid. Today, the company sells only one hybrid model: a version of the Civic compact. "I must admit that Toyota was better with its strategy of focusing on the Prius and trying to build an environment-friendly image," he says.

Now, Honda is fighting back. By early next decade, it aims to sell 500,000 hybrids annually, up from just 55,000 in 2007. Next year it expects to offer a new compact in the U.S., Japan, and Europe that, like the Prius, will be sold only as a hybrid. Honda has high hopes for the car, and wants to sell 200,000 units a year eventually. In 2010, Honda will launch a hybrid sportster based on a sleek concept car called the CR-Z that it unveiled at the Tokyo Motor Show in October. That same year, Honda will likely release a new hybrid Civic, and it's planning to market a hybrid version of the Fit subcompact soon thereafter.

As sales pick up and Honda gets better at making hybrids, the company expects to reduce costs sharply. R&D boss Kato says he can bring the price differential between a hybrid and an equivalent gasoline-only car below $2,000. While not as powerful as Toyota's hybrid technology, the Honda system is lighter and less complex, so its new models may offer better gas mileage. Honda hasn't disclosed pricing, but the compact hybrid due next year could retail for around $18,000-$3,000 less than a Prius, reckons Tatsuo Yoshida, an analyst at UBS (UBS) in Tokyo. He adds that while selling 500,000 hybrids a year will be a challenge, the new cars could also help Honda steal some of the green limelight back from Toyota. "Publicity-wise, the new hybrids are very good news for Honda," he says.

For the rest of the article, follow the this link;
http://www.businessweek.com/magazine/content/08_30/b4093062857546.htm?chan=autos_autos+--+lifestyle+subindex+page_top+stories