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Honda Gearing Up for Run on Prius in a Battle for the Hybrid Market

With plans to roll out a redesigned Civic hybrid this year, Honda Motor Co. has made it clear that it intends to retake the lead in sales of gas-electric cars from Toyota Motor Corp.’s Prius.


What Honda officials didn’t say was how.


With U.S. headquarters in Torrance, Honda was the early leader in the hybrid market with its Insight and Civic models. But when Toyota redesigned the Prius for 2004, the futuristic looking car quickly took over the market for gas-electric vehicles. Last year, Toyota sold more than twice as many Priuses as Honda sold hybrid Civics.


“If you buy a hybrid now with the intention of wanting to be seen as an environmentally friendly driver, Prius is the best choice,” said Anthony Pratt, an analyst at Westlake Village-based automotive research firm J.D. Power & Associates. Even technophiles, he said, “want to be identified.”


Thus far, Honda has taken a different approach, basing its hybrid on an existing model. That has led to criticism that its hybrid is ho-hum.


“We find that people like the hybrid Civic because it looks and drives just like a Civic,” said Chuck Schifsky, a spokesman for American Honda Motor Inc.


But others at Honda say that the hybrid will have at least some styling differences to distinguish it from other Civics. They’ve also hinted at performance enhancements that will make it “spot on or better than Prius,” Honda’s U.S. sales chief, John Mendel, told Bloomberg News.


Honda officials may have concluded that what ails the hybrid is similar to what ails the entire Civic line, which has been losing market share over the past several years. “The Civic generally is beginning to look old compared to some of its competitors,” Pratt said. “But whenever you see a redesign, sales go up.”


The Civic hybrid is expected to hit showrooms by October, one month later than gasoline models.



More like a Pruis?


Honda is expected to hew closely to its design for a gas-powered four-door sedan. In January, the automaker introduced an early version of a futuristic-looking two-door Civic Si performance coupe at the Detroit Auto show. In the past, Honda has produced two-door, hatchback and four-door versions of the Civic with significant design differences. But the direction toward a look that’s similar to Prius is apparent.


“The big question is, will they be changing their hybrid system from a motor assist to a full hybrid like the Prius, which has superior performance?” said Pratt, who writes J.D. Power’s quarterly Hybrid-Electric Vehicle Outlook. “If they do, that would generate even more interest.”


Both cars have internal combustion engines assisted by an electric motor that gets recharged through the capture of energy produced by braking. But Prius’ electric motor can propel the entire car, while the Civic’s only assists the gas engine. This has been a fundamental difference between Honda and Toyota’s hybrid strategy (the Civic hybrid has been criticized for lacking power).


Phil Reed, an editor at Santa Monica-based automotive research firm Edmunds.com, said the current Civic hybrid compromises the conventional Civic’s zippy performance, and calls the Prius’ 10-second 0-60 mph acceleration “uncompromising.”


Honda’s strategy of basing its hybrids on existing Civics and Accords echoes other automotive companies. Even Toyota plans a hybrid version of its Highlander SUV, and already has a hybrid version of its luxury SUV, the RX400, sold under Toyota’s luxury Lexus badge.


Doing so spreads the risk and expenses related to development and production.


Last year in the United States, Honda sold 309,000 Civics, including the hybrid and natural gas-powered versions, and 387,000 Accords.


The future of hybrids appears to lie in models based on existing popular lines. Aside from Honda’s tiny two-passenger Insight, launched in 1999 as the first hybrid on the market, all the 17 cars and 21 light truck hybrids expected to reach the market by 2011 are to be based on existing models, according to J.D. Power.



Styling ‘never a priority’


When a group of environmentally conscious luminaries arrived at the 2003 Academy Awards in a procession of Priuses instead of limousines, they were making a fashion statement, as well as an environmental statement. That stunt would never have worked with a Civic hybrid because its exterior is virtually indistinguishable from the conventional Civic.


And while the Prius and Civic have nearly identical sticker prices around $21,500 the Prius’ popularity and resale value keep demand strong.


Buyers are willing to wait months to get them and paying, on average, $1,000 more than Civic hybrid buyers, according to Kelley Blue Book.


At Gardena Honda, where 15 to 20 Civic hybrids are purchased each month, Sales and Leasing Manager Ahmad Rabie said the selling points of any Civic are its practical attributes: reliability, low price and high mileage.


“Through all of its generations, styling was never a priority with the Civic, except the Si,” Rabie said. “The style was always acceptable, but that’s not so important. You can sell good quality with an ugly car.”


While the current Civic hybrid has only a slightly different appearance from its conventional counterpart, it’s more nicely appointed. “It’s basically like a more luxurious version of the top-of-the-line Civic sedan,” Reed said.


Selling the new Civic hybrid in Southern California is crucial to Honda. California is the largest U.S. auto market, and it has the strictest environmental laws, the highest gas prices, the trendiest tastes among its population and the most generous tax breaks for hybrid owners.


Of the 88,000 hybrids sold in the U.S. last year, 25,021 were registered in California, and 10,399 were registered in the city of Los Angeles, 2,000 more than in San Francisco.


For Honda, that carries a lot of weight. “As goes California, so goes the country,” said Schifsky. “You’ve got celebrities driving hybrids, you’ve got a celebrity governor talking about alternative fuel vehicles, so it’s in the news and on people’s minds.”

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