Honda's (NYSE:HMC) U.S. sales took a big hit in August. But analysts think things are looking up for the Japanese giant in September.
Several analysts have forecast double-digit year-over-year percentage increases in Honda's U.S. sales for September. What could be driving that?
After a big decline in August, a gain looks likely for September
Analysts at Kelley Blue Book expect Honda's sales gains to outpace the overall market's growth for September. They see Honda's sales jumping 14.2%, versus a 12% forecasted gain for the market as a whole. Other analysts see Honda's sales growing roughly in line with the overall market's -- but either way, it's a big improvement over last month's 6.9% decline.
What's driving the turnaround? Aside from the possibility that Honda's dealers had a great Labor Day weekend, there's no obvious answer. Honda, like rival Toyota (NYSE:TM), has been feeling the pain of a major shift in Americans' car-buying preferences. More and more Americans are choosing to replace their sedans with car-based "crossover" SUVs.
Honda (again, like Toyota), hasn't been left behind by this trend. Its compact CR-V crossover is wildly popular, and has been for a while. Honda is building on that popularity with a new one-size-down model called the HR-V, which has been gaining steam since its introduction earlier this year.
But Honda's bread and butter in the U.S. has long been its sedan models, the Accord and Civic. Those are the cars that built Honda's reputation in the U.S. way back in the late 1970s and early 1980s, and they're still the models the average American associates most closely with the brand.
They still draw plenty of customers to Honda showrooms. But sales of both have suffered this year. Civic sales were down 4.2% through August, while Accord sales have been off a shocking 14.8%.
The Civic and Accord are still two of Honda's three biggest sellers in the U.S. The third is the CR-V -- but CR-V sales are up just 5.7% this year. (Honda hasn't explicitly said so, but the CR-V's sales growth may be constrained by supply. It's possible Honda is running up against production limits.)
That has made things tight for Honda. Though August, its overall U.S. sales were up just 1.2% this year, well behind the overall market's 3.8% gain.
New and (hopefully) improved Accords and Civics are incoming
It's possible that Honda's sales boost in September is being driven in part by dealers' efforts to clear out leftover 2015 Accord and Civic models. The market for sedans may be in decline, but there are still plenty of sedan buyers. Honda itself isn't offering big discounts -- TrueCar estimates that Honda's incentives in September will average just $2,130 per vehicle, among the lowest in the industry. -- but dealers may be finding other ways to move the metal.
Dealers need to clear out 2015 models, because both the Accord and Civic have been improved for 2016. The Accord isn't all-new, but Honda has given it a big overhaul for 2016, making it quieter and smoother to drive. That should help turn more test-drivers into buyers.
The new Accords have just begun arriving at U.S. dealers. A completely new version of the Civic will follow in a few months. The new Civic is said to be sportier, with more dramatic styling and a nicer interior.
Both are likely to draw more buyers than the outgoing models, at least for a while. But Honda might need more crossovers if it wants to recapture its sales momentum in the U.S.
John Rosevear has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.