Honda uses dealer incentives to increase sales in U.S.

Although Honda Motor Co. performed quite poorly in its November sales, it still hopes to recover its positions by offering some great cash incentives to U.S. Dealers in order to boost their business during the holiday season. On Wednesday the company announced that it would pay 3,000-dollar bonuses for every vehicle sold above its total sales in December 2012. This will give their retailers the opportunity to make special promotions or even drop prices in order to encourage customers to buy their products.

The company sent a special memo to its dealers, in which it explained that the December sales target will remain the same as an year ago. All dealers, who manage to surpass this number, will receive 3,000 dollars for each car sold beyond the target set, up to a maximum of a 20% increase in sales.

Such a practice is not strange to most auto makers, who often offer bonuses to their retailers. However, the new strategy of Honda is something that is worth emphasizing on, because usually the company is not keen on providing such sales incentives. The executive vice president of the companys operation in the U.S. – John Mendel – announced that such a promotion is expected to increase the sales of the company reached in December 2012.

The fact that Hondas new strategy is carried out during the holiday season should not be underestimated, because the campaign is also used as a counteraction to the rebates and promotions of the companys competitors. Naturally, there are no guarantees that such actions will help Honda minimize their competitors profit margins.

An average 1,896 dollars per car were spent by Honda on sales incentives in November. The sum is not only smaller than the one spent last year, but also considerably smaller than other automakers investments. For example, both General Motors and Ford Motor Co. spent more than 3,300 dollars a vehicle. Most deals claim that it is exactly the modest incentives of Honda, which are the reason for the poor performance of the company in November this year.

On the other hand, Honda Motor Co. also needs the incentives in question in order to clear out the unsold 2013 Civic compacts and Fit subcompacts stocks.

According to Bloomberg, the current share price of Honda Motor Co. Ltd. in Japan are 1.19% up, and its one-year return rate is 58.01% up. However, on the New York stock exchange, the companys current share price is 0.80% down, and the one-year return rate is 26.14% up.