Mustang Parts
   Carrying Saleen wheels and Bullitt wheels.

Monday, October 27, 2008

Honda GX Stonewall? Hardly.

According to this piece in TheAutoChannel by one Edwin Black, Honda is pulling an Evil GM (see: EV1) and intentionally limiting the number of Civic GX (compressed natural gas) vehicles it produces and sells.

For all the sinister insinuations, Black doesn't really have an explanation for why it would be that Honda might be producing Civic GXs in limited quantities. That's because Honda clammed up and won't talk to the press about it, which is not surprising. All he can come up with is that Honda is pushing its much thirster Pilot SUV. As if a mid-sized SUV would somehow be hurt by sales of a compact sedan?

There are a number of plausible explanations for why Honda, which is certainly interested in polishing its already good environmental credentials, would be cautious with the Civic GX. Here are a few that are obvious to me:

Quality. Honda is obsessive about quality, and they may want to roll their CNG Civic out slowly until they fully understand how it can fail in the harsh environment of real American drivers.

Cost. Honda may not be making money on these, in fact they could easily be losing money on them, perhaps due to supplier issues. Honda may be treating the program as more of a marketing and product research exercise (like the original Insight?) until they understand the market for CNG better.

Dealerships. Since the CNG Civic has a specialized fuel system, different engine software, and perhaps other changes, special tools and training are required to service it. Since Honda doesn't (can't by law) own dealerships, dealers may have to put up significant capital to get CNG certified. Or perhaps Honda foots the bill, in which case Honda pays significant money for each dealer.

Honda isn't going to spread CNG dealers around the country, if there aren't enough fuelling stations, or customers for that matter, for it to make sense. They will pick a few entry markets, like California and New York, and go there.

And since Honda is obligated to service their CNG Civic, they obviously aren't going to want to sell them in places where they don't have a dealer certified for it yet.

The market is shifting rapidly this way and that. At first, pundits thought diesel was the new way--then the price of diesel shot up so that there was not much of an advantage over gasoline. The ethanol pendulum is swinging one way now, but could swing back the other way again if a backlash builds up. Oil is starting to look cheap again.

Honda isn't being sinister, they're eing cautious in an unpredictible and dangerous economy.

1 comment:

B said...

Hi AP-

Firstly, thanks for visiting TheAutoChannel.com, for taking the time to read our story about Edwin Black, and for commenting on it.

I think you raised a few interesting discussion points, and if you haven’t yet had the opportunity to read Edwin’s latest book, THE PLAN, or to read other stories that we have on our site about him and CNG-powered vehicles, I can understand why you took the position you did.

I can’t respond specifically for Edwin, but I think I can supply some if not all of the information as we, The Auto Channel, know it. I will, however, also forward your blog to him in the hope that he’ll be able to shed some additional light on the subject.

I’ll be addressing your points out of order to try and create an easier flow (for me).

Honda has been making CNG vehicles for many years, and selling them in the United States for about 10 years. The Civic GX is not the only CNG (or alternative fuel model) that they manufacture; it is merely the only one that they continue to sell in the U.S. They have great knowledge and understanding of CNG vehicles, and there’s no reason to think that they are overly concerned with production quality since everyone you speak to about their Honda CNG car is extremely satisfied, including Edwin Black (he owns or has owned a Civic GX). Honda makes their CNG cars with the same great quality as their gasoline-powered cars. Their go-slow process is not because they need to perfect the CNG engine, do market research, or conduct climate and environmental testing. That was done a long time ago. The EPA and CARB would have never let Honda sell CNG cars to consumers if this wasn’t already worked out.

Keep in mind that Honda is not the only large manufacturer making CNG cars today; virtually all of them do. But again, Honda is the only one selling one in America. GM, Ford, and Chrysler all make CNG vehicles, some assembled right here in North America, however they are all shipped and sold elsewhere. And like Honda, there are no qualitative differences between their respective gasoline/diesel/CNG/propane models that are as a result of which engine system they use. If a model is good, it’s good across the board. If it is lousy stinks, it’s lousy regardless of the fuel it uses.

Honda’s yearly Civic GX availability in America is around 1,000 vehicles. Yes, they lose money on these vehicles. But they lose money on the GX because it is not economical to only make and sell 1,000 “popularly-priced” cars. The Civic GX is priced just slightly higher than the gasoline Civic (low to mid $20k). If you manufacture and sell $400,000 cars, 1,000 units can be very profitable.

So the question is WHY? Why do they continue making and selling the GX for America? Or, why don’t they make and sell more? The answer to the former is the unknown. Divining an answer to the latter is the reason for making a statement like “Honda is Stonewalling Sales of the Civic GX.” Incidentally, the use of the word “Stonewalling” was an editorial insertion by The Auto Channel onto Edwin’s story; he actually used a different transitive verb.

Now, as an excuse, Honda uses what Edwin calls “two keys,” that is to say, words, to disguise their reason for impeding the manufacture and sales of CNG cars: Demand and Infrastructure. Demand is consumer demand for the car; Infrastructure is the fueling availability needed for people to freely drive a CNG car.

By the way, even if these excuses were true, they don’t answer the first question: Why do they continue making and selling the GX for America? Certainly financial loss, low or no consumer demand, and insufficient fuel availability should be enough reasons to justify why any for-profit company would discontinue a product. Still, they continue.

To the obvious follow-up questions, is there a demand for more Civic GXs and is there CNG fuel availability, the double answer is yes…at least there appears to be judging from all reports coming from dealers that say they have waiting lists for the cars, from the information gleaned at the increasing number of alt car/fuel expos that are popping up around the country, and from the number of existing CNG fueling stations that already exist in several critical geographic areas.

Are there as many CNG facilities as there are gasoline facilities? No, there are not. But there are enough to support far more CNG vehicles than are currently on the road, and more are being built all the time (and that number would dramatically increase if there were more CNG vehicles put in circulation). But, and this is a big point, one of the great benefits to owning a CNG vehicle is that you can install a CNG filling unit right in your own home, as long as your home uses natural gas (for appliances and heating). Not only does an in-home filling unit save up to 50% off the price of CNG at the pump (which is already significantly lower than the equivalent supply of gasoline), but it means that the average driver would almost never have to use a roadside CNG fueling station.

It’s the fact that there are in-home filling units that make the whole situation even stranger, because Honda owns Fuelmaker Corporation, the primary manufacturer and seller of in-home CNG filling units. Honda has directed Fuelmaker to limit their sales and installations in America (while placing no similar restrictions on sales and installation outside of the U.S.). So, in effect, Honda has created its own CNG shortage.

Recently, Honda sold Fuelmaker to one of T. Boone Pickens’ companies. This appeared to be the breaking down of one major roadblock. Unfortunately, Honda did not follow through on the delivery of certain financial materials and the deal fell through.

Some months ago, when Honda came under fierce criticism about the low production runs of the Civic GX, they stopped production altogether and then announced that they would be resuming production (at a ramped up rate) at the new plant in Greensburg, Indiana when it opened in the Fall of 2008. A few weeks ago, the plant went on line and began turning out new cars…not CNG capable, but 4-cylinder gasoline models. I called the head of marketing communications at the plant and asked about CNG cars. He had no information to provide and couldn’t provide a date as to when they would start making CNG cars. Through his inside sources, Edwin Black found out that the likely start date for 2009 Civic GX cars is June 2009, which would be more than one year since Honda stopped production of 2008 models in the U.S.

You brought up the points about dealers and service, and actually provided the answers in your own suggestive explanation. Honda has already established a certain number of qualified dealers in various markets that are capable of servicing the vehicles. They didn’t just establish this dealer network; they’ve had it in place for a few years. These dealers all seem as perplexed by Honda’s inactions as anyone in the media or any consumer wanting to buy a new GX. They desperately need product to sell…product that a hungry environmentally-concerned crowd wants to buy. The dealers don’t have the product and they don’t know when they’ll get more.

The danger that Honda may run into is that in those dealerships that have qualified service technicians, the mechanics may die of old age before they ever have the opportunity to provide the service they’ve been trained for. Then the training would have to begin all over. On this point, there are 27 colleges around the country that are part of the University of West Virginia automotive program that have the ability to train technicians in the service of all alternative fuel systems.

You made the statement “All he (Edwin Black) can come up with is that Honda is pushing its much thirstier Pilot SUV. As if a mid-sized SUV would somehow be hurt by sales of a compact sedan?”

Well, the fact is that Honda is much more interested in marketing their thirstier Pilot SUV, because a big vehicle offers greater profit margin than a smaller vehicle. This is always true, and it’s true even with the comparison between the Pilot and a gasoline-powered Civic. I believe that Edwin’s point is that we don’t need sales of more SUVs that use a lot of gasoline and that the only reason why people are continuing to buy big vehicles right now is that the car companies are offering them much better deals than for small cars. And the only reason this is happening is because the automaker lobbyists were successful in getting Congress to grant big subsidies to the automakers for the sale of the big units. They pork-barreled the consumer right into a dangerous corner.

Moreover, CNG engines don’t just work in small cars, they work very nicely in vans, trucks, and SUVs as well. So it’s not just a question of a consumer choosing between a small Civic and a luxurious SUV. Honda could and should be putting CNG engines in their Pilots, thereby getting and giving the consumer the best of all worlds.

The above is why Edwin Black and others are very pissed off about Honda’s actions, and why when you combine the facts with Honda’s refusal to talk about the situation, that we chose to use the word “Stonewalling.”

One final point: You ended your blog entry with “Oil is starting to look cheap again.” I hope you meant this as just a tongue-in-cheek aside and not as a serious recommendation that the gasoline crisis is over or that $3 per gallon gasoline from foreign oil producers should ever be acceptable.

I urge you and your readers to read THE PLAN (www,planforoil.com) and read the thousands of other articles we have on the subject at TheAutoChannel.com. We also have two videos of Edwin speaking at the 2006 Alt car Expo and at last months Western Automotive Journalists’ meeting.

Best regards.

Marc J. Rauch
Exec. Vice President/Co-Publisher
THE AUTO CHANNEL