A Surprise for Honda: Sales of Its Small Cars Are Rising

By Markets Fool.com

The new-for-2016 Civic managed a small but surprising sales gain in August. Image source: Honda.

Continue Reading Below

Honda (NYSE: HMC) said that its U.S. sales fell 3.8% in August, roughly in line with the overall industry's result. But it managed good results for some of its crossovers and, surprisingly, two of its small cars.

SUVs are booming -- and so are Honda's small sedans

Honda's sales have suffered relative to some rivals in recent years as buyers have been migrating away from sedans toward SUVs, particularly crossover SUVs. Sedans like the Civic and Accord have been the source of Honda's sales strength in the U.S. for decades, but it's only recently that it has been able to ramp up crossover production to the point where the SUVs have become major contributors to its total U.S. sales.

That trend continued to play out in stark terms in Honda's U.S. sales numbers in August. Sales of its longtime flagship, the Accord sedan, were down over 26% year over year, while sales of its "trucks" as a group rose 4.5%. Honda's "trucks" include its crossover SUVs, the Ridgeline pickup, and the Odyssey minivan. Odyssey sales were down 26%, but the other models all did well.

Honda's CR-Vcrossover is now its best seller inthe U.S. Sales were up 5% last month. Image source: Honda.

Continue Reading Below

In particular, the compact CR-V crossover has become Honda's best seller in the United States. Its sales growth stalled for a while as Honda worked to increase supplies, but that has changed: The CR-V posted a 5% sales gain last month. The all-new Ridgeline pickup managed 3,437 sales, up from just four sales of its discontinued predecessor a year ago.

While sedan sales have been down across the industry, Honda's smaller cars bucked the trend in August. Sales of the small Fit nearly doubled from a year ago, while Civic sales increased 2.4%.

A good gain for the newest Acura crossover

Sales at Honda's upscale Acura brand followed a similar pattern. All of Acura's sedan models posted year-over-year declines, with its biggest seller, the TLX, down over 17% from a year ago. But the brand-new MDX crossover gained 8.1% over its predecessor's year-ago results. Honda hinted that the MDX could see further gains as dealer inventories continue to rise.

The new Acura MDX crossover SUV sold well in August. Image source: Honda.

In happy news for car enthusiasts, Acura's much-anticipated new sports car, the NSX, has begun arriving at dealers. Twenty-two of the $156,000 supercar found owners in August, the company said.

Making the most of an increasingly choppy U.S. market

Like its best-performing rivals, Honda appears to be making the most of a choppy U.S. market. After several years of growth, it's likely that U.S. new-car sales have plateaued, a situation that historically has made for up-and-down months.

Honda has been able to respond to the booming demand for crossover SUVs, raising production of the CR-V and introducing the smaller Fit-based HR-V to add a more affordable option to its lineup. Both are thought to be more profitable products than their sedan siblings, and both are selling almost as quickly as they can be delivered to Honda's U.S. dealers. Honda has also been ableto hold down its incentives, which are still among the lowest in the industry.Despite the choppy market, all of that should set Honda up well for a good third-quarter result from its U.S. business.

A secret billion-dollar stock opportunity
The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.

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.