Is Honda’s investment on a shrinking segment viable?
If you don’t know Honda any better, they have made a move that leaves most financial experts scratching their heads in amazement and wonder. They have boldly announced last month that they will be adding a whooping investment of $267 million for the production lines of the 2018 Accord midsize sedan as well as hiring 300 new employees for Ohio.
This move did not receive a standing ovation from the business world because the midsize sedans have been moving against the current lately as it continues to decelerate in terms of sales. Last year, the sedan saw a drop of 12 percent in sales compared to the previous year and this trend is expected to continue for the coming years.
Mike Ramsey director of the research team at Gartner stated that the sedan segment in the United States will never be the same as it was a decade ago and that the sales from sedans is expected to be at a steady decline if not a flat line.
But Honda expects that although the segment will get smaller and smaller throughout the coming years, it believes that other players or brands will get out of the segment to target higher yield SUVs or Product lines. Thus it will be free to catch the leftover consumer market from the shift of these competing brands.
Ramsey said that, “Honda has been successful with that in the past.”
That is what Honda’s $267 million investment is for, to upgrade their current facilities and technologies that is needed for the newer models. For instance, 342 new robots have been acquired costing at a bulky $165 price tag which improves overall weight and chassis durability.
While 200 of the 300 new employees will be charge at facilitating the new technologies used in the assembly lines.
The point being is that this move of Honda that seemingly ignores the signs of the times with regards to the future of sedans is to help Honda be at a better position in becoming more ready and flexible and easily able to accommodate the randomness of whatever the future may bring.