Toyota, Nissan Boost February Production on Asia, U.S. Demand

Bloomberg

Toyota Motor Corp., the world’s biggest automaker, Honda Motor Co. and Nissan Motor Co. increased global output in February on surging demand in Asia and amid a recovery the U.S.

Toyota’s production rose 83 percent to 655,180 vehicles from a year earlier, it said today in a statement. Output at Honda Motor Co., Japan’s second-largest carmaker, rose 49 percent to 284,711 units, and Nissan, the third-largest, built 270,366 vehicles, up 72 percent, the companies said separately.

Japanese automakers were buoyed by rising sales in China, Japan, and the U.S., where sales rose for a fourth month in February. Output plunged a year earlier amid a global recession.

Toyota increased production even as the company’s American sales dropped 8.7 percent in February, dragged down by recalls of more than 8 million vehicles since September for problems including unintended acceleration. Toyota’s U.S. production increased 70 percent to 84,184 for the month, it said.

This month, Toyota’s sales in the U.S., helped by an incentive campaign to counter the effects of the recalls, may report a 37 percent jump, according to Dave Cutting, senior manager of North American forecasting for J.D. Power & Associates.

The company is using no-interest loans and lease discounts in the U.S. to coax back buyers after sales dropped 12 percent in the first two months of this year.

China Production

Toyota more than doubled production in China, which surpassed the U.S. as the world’s biggest car market in 2009, to 56,397 in February, an increase of 136 percent. Industrywide sales of passenger cars, trucks and buses in the country rose 46 percent from a year earlier to 1.21 million vehicles.

It plans to increase capacity at a joint-venture plant with China FAW Group Corp. in Chengdu to 30,000 units from 13,000 units by June. The plant builds the Coaster and Land Cruiser Prado models.

The Toyota City, Japan-based carmaker also intends to build a second plant in Changchun, Jilin province, where it may make Corolla compact cars.

In Japan, sales at Toyota and other carmakers began recovering from a yearlong slide in August as government rebates and tax cuts for fuel-efficient vehicles helped rekindle demand. Toyota’s Prius hybrid was the best-selling car there in February for the ninth straight month.

Toyota shares fell 0.5 percent to 3,740 yen at the 3 p.m. close of trading in Tokyo.

U.S. Recovery

Honda’s U.S. production in February increased 62 percent to 76,646 as it benefited from the recovery in auto sales there. Edmunds.com estimates U.S. car sales will rise 31 percent in March from a year earlier, while Honda’s may gain 22 percent, the industry researcher said last week.

The Tokyo-based company increased China production 26 percent to 43,843 units. Honda’s local venture with Dongfeng Motor Group Co. said last month it will invest 1.15 billion yuan ($168 million) to build a second plant in China that will begin production in the second half of 2012. The factory’s target capacity for Honda-brand vehicles is 240,000 vehicles a year.

Honda will also increase production capacity at the venture’s existing plant in Hubei province to 240,000 vehicles this year, from 200,000.

Nissan increased February production in Japan by 121 percent to 97,109 vehicles, including a tripling of exports to 50,279 units, the Yokohama-based automaker said. Its sales in China rose 34 percent to 58,323 units.

Toughening Competition Means Honda Motor May Need To Innovate Faster

From Forbes

NOVI, Michigan -- Honda Motor Co.'s top U.S. auto executive says the company may have to update its models faster because the competition is getting so tough in segments where the Japanese automaker has strong sales.

John Mendel said Honda ( HMC - news - people ) will stay ahead of the pack with new technology and by introducing models in new market sectors, but he concedes it may have to update its cars more frequently as competitors keep getting better in quality, reliability and fuel economy.

"We don't have the gap that we had years ago," he said Friday just before unveiling a new Accord crossover vehicle in suburban Detroit. "There's nobody out there building junk any more."

The Accord, Honda's top-selling car and traditionally among the best sellers in the U.S., Honda's largest market, is under serious assault from prime competitors Toyota Motor Corp. ( TM - news - people ), Nissan Motor Co. ( NSANY - news - people ), Ford Motor Co. ( F - news - people ) and General Motors Co.

All four competitors have four-cylinder midsize models that have passed the Accord in highway gas mileage, and most have received good marks from independent reviewers.

Mendel, speaking before he introduced the new Accord Crosstour, said in some hotly contested market segments, Honda may have to speed up its normal two-year cycle of refreshing vehicles and roughly five-year cycles of total redesign.

Honda is scheduled to update the Accord next year and redesign the car by 2013. But Mendel says the redesign could take place before then as Honda introduces new technologies to raise fuel economy.

New four-cylinder versions of GM's Chevrolet Malibu (33 mpg highway) and Ford's Fusion (34 mpg highway) have passed the Accord's 31 mpg in highway gas mileage, even though Honda usually leads the pack. Toyota Motor Corp. updated its top-selling midsize Camry for 2010 by adding a six-speed manual transmission, boosting highway mileage to 33, and Nissan's Altima gets 32 mpg.

Both GM and Ford used six-speed automatic transmissions to raise highway mileage with taller gearing that makes engines more efficient by working less. The Accord, though, still has a five-speed automatic.

Honda, Toyota and Nissan have dominated the critical midsize car market for years as Detroit automakers spent most of their research dollars on larger vehicles, said Joe Barker, senior manager of North American vehicle sales forecasting for the CSM Worldwide consulting firm in Northville, Michigan.

But in the past two years, Ford, GM and Korean automaker Hyundai Motor Co. have invested heavily in midsize cars and improved fuel efficiency, safety, ride and performance, pulling even or ahead of Honda and Toyota, Barker said.

"The competition, especially in Honda's sweet spot, is only going to intensify in the coming years," Barker said.

Honda, Mendel said, normally waits for the redesign cycle to introduce new technologies that would boost fuel economy, but he wouldn't say specifically what the company might do with the Accord.

Honda already has developed six-speed automatic transmissions for two new models in its Acura luxury brand, the ZDX sport coupe and the MDX sport utility vehicle.

So far this year, Honda's U.S. sales are down 25 percent compared with the first nine months of last year, but its market share has grown from 11 to 11.3 percent. Overall, U.S. auto sales are down 27 percent, according to Autodata Corp.

Mendel says he is constantly thinking about how to balance keeping the company's products fresh against the cost of more frequent updates. On some models, like the Accord, leasing patterns have grown longer, so people don't trade vehicles as often. But that has to be balanced against the competition, as well as how much the company is able to do in the two or three-year refresh, he said.

A lot can be done in mid-cycle updates with new engines or transmissions and a new body style that can change a car's looks as opposed to redesigning the whole vehicle, Mendel said.

"So you get new for less than the cost of new, at least in the customer's eyes," he said.

The redesigned Accord certainly will get new engine and transmission technology as well as aerodynamic improvements, Mendel said. Stricter government fuel economy standards also may force Honda to update vehicles more frequently, he said.

The current Accord, Barker said, is still among the best cars on the road. He says Honda will catch up in fuel economy when it does the updates, but staying on top won't be as easy as in the past.

"I think that even though Honda will continue to invest in technology and continue to strive to be a segment benchmark, it has its work cut out for it," Barker said. "The competition from General Motors and from Ford and Hyundai is only getting better."