Honda Says ‘Too Small’ Insight Hybrid May Miss Sales Target

By Makiko Kitamura and Tetsuya Komatsu

Jan. 21 (Bloomberg) -- Honda Motor Co., Japan’s second- largest carmaker, expects to miss its sales target for the Insight hybrid after U.S. drivers shunned the model in favor of a revamped Toyota Motor Corp. Prius.

Selling 200,000 Insights worldwide in the first year “looks tough,” Executive Vice President Koichi Kondo said in an interview on Jan. 19 in Tokyo, where Honda is based. “I think we compromised too much on size in pursuing fuel efficiency” for the U.S. market, he said.

The Insight is “too small” and there isn’t enough room in the back seat for U.S. customers, Kondo said. The Prius outsold the Insight about seven-to-one in the U.S. in the last quarter of 2009 after Toyota introduced a revamped version of the world’s bestselling hybrid car in June.

Honda had sold 130,445 Insights worldwide as of Dec. 31 since introducing the car in Japan in February and in the U.S. in March. In the U.S., the company has sold 20,572 Insights. It expected to sell 90,000 there in the first year.

Lower U.S. fuel prices have also hurt hybrid sales, Kondo said. Gasoline averaged $2.74 a gallon yesterday in the U.S. compared with more than $4 in July 2008.

Lower gasoline prices have also made developing a competitive hybrid version of Honda’s Fit compact more difficult, Kondo said.

Engineers ‘Struggling’

“There are plenty of people who think that the current Fit meets their needs already” with its fuel efficiency, he said. “A hybrid version might seem expensive. Our engineers are really struggling.”

The gasoline-powered Fit was the second-best-selling car in Japan in 2009, behind the Prius. The hybrid Fit is due to go on sale later this year. A hybrid Honda CR-Z sports-car will enter the market next month.

Honda will also likely cut its Japan sales forecast for this fiscal year from 685,000 vehicles after the extension of a subsidy program, Kondo said, declining to provide a new forecast. The government’s decision to lengthen the subsidies by six months will prevent an expected bump in sales in March, the original termination date, Kondo said.

Next fiscal year, Honda’s Japan sales will likely decline as the stimulus measures end, he said.

To contact the reporter on this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net; Tetsuya Komatsu in Tokyo at tekomatsu@bloomberg.net