Honda exec says US market near capacity, could hurt subprime buyers

Thu, 21 Aug 2014

Is there a point in the US auto industry where companies should start considering the welfare of their customers ahead of selling more cars? American Honda Executive Vice President of Sales John Mendel thinks that level exists, and we may be getting very close to it.

According to Automotive News, Mendel believes that finding more customers in the market could require pursuing subprime buyers and offering longer-term loans. However, he refuses to use those tactics. While selling models this way can improve things briefly, the strategies hurt resale prices and lower vehicle profits over time. The company won't do "stupid things in the short-term that damage the person who bought yesterday," he said to Automotive News. "It's a very, very short-term tactic especially in the subprime area."

American Honda, which combines the Acura and Honda brands, has seen market share decline from 9.7 percent to 9.1 percent through July 2014, according to Automotive News, and Autoblog's By the Numbers stats showed it posted falling sales in five of the seven months with data this year. Though, Mendel claims that was partially because the company focused on retail sales over fleets. The delays of the launches for the Honda Fit and Acura TLX likely didn't help either.

The rise of subprime loans is an emerging trend in the auto industry. A recent study by Equifax found that the total amount in outstanding auto loans was the highest it ever recorded and up 10 percent from a year ago. It also found that the total balance from subprime buyers had reached $46.2 billion, an eight-year high. The feds appear to be getting interested too with GM's financial arm under investigation for how it securitizes its lending to these customers.

By Chris Bruce