History Of Honda Civic Hybrid Marketing Essay

First manufactured by Porsche in 1899 Hybrid car has seen growth in last decade. Honda Civic Hybrid is a hybrid version of Honda Civic manufactured and introduced in Japan in 2001. This is first among hybrids vehicles to get AT-PZEV(Advanced Technology Partial Zero- Emissions Vehicle) certification from Air Resources Board- California. In US Civic hybrid is the second best seller hybrid car. 255,000 units of Civic hybrid were sold globally by 2009 [1] .

Aim of the Task

Aim of the task is to critique the way Honda Civic Hybrid an innovative product of Honda has altered several time to get into this present state.

Hybrid Car:

Hybrid Electric Vehicles (HEV) runs using both electricity and gas power. Which can lead to cost saving hence the increased popularity in recent days (Exum & Messina, 2004). Hybrid cars are often equipped with smaller engines and its low part count together with lighter components makes it an efficient vehicle.

History of Honda Civic Hybrid:

In the following sections how Honda Civic Hybrid has evolved over time to respond to customer needs and industry standard is presented.

First generation (2001-2005)

First Civic Hybrid was made from the base of Civic 7th Generation which was introduced in Japan in end of 2011 and early 2003 in US market. It was claimed to be most fuel efficient 5 passenger vehicle run on gasoline.

Design and features

Civic Hybrid was second hybrid gasoline electric system after Insight. Manual transmission model rated 5.1L/100Km (city) and 4.6L/100Km (Highway) as per US Environmental Protection Agency (EPA) fuel millage estimations.

The electric motor is placed in between transmission and gasoline engine. This is able to generate 13 horsepower. The motor plays the role of a generator when it need to recharge the nickel metal hybrid battery. Motor is civic hybrid is thicker than Insight. With improved metallic coils in DC brushless motor this hybrid was able to generate thirty percent higher assisting and restoration torque (Erjavec & Arias,2007).

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The electricity is stored in a collection of 120 1.2volt NI MH D-cells. Efficiency of battery is achieved through reduction in energy usage. Battery along with electrical controller is stored in ‘Intelligent Power Unit (IPU)’. This new system was 50% smaller in size compared to previous non hybrid versions also weight of this was 29Kg that is 1/3 smaller compared to Insight.

This car featured an Idle stop function which would turn the engine off automatically and restart again as soon as the driver takes their feet off from the brake. This resulted in energy efficiency and lower emission (Jex, 2007). Intelligent programming allowed the system to stay on until it had clear indicant of stoppage ( if the car was running at 10mph and stops the engine would not shut until the car is stopped again for 15 seconds or more).

Fuel efficiency was additionally improved by another 6% by using a front air dam and rear spoiler. Revised underbody panels reduced drag coefficient by 0.02 (0.30 to 0.28) and use of electric power instead of traditional power steering resulted in lower parasitic loss and special lower resistance tire. This reduced road noise better compared to hybrids like Insight and Toyota Prius.

Fuel economy

What makes Civic Honda different from non-hybrid vehicles is that it is 40% more energy efficient. With moderate acceleration, keeping engine speed below 2000rpm and avoiding speeding more than 50mph can lead to very low energy consumption.

Reception and Awards

From 2002-2004 Civic’s Hybrid Engine won International Engine of The year award in 1-1.4L category.

In year 2003-2004 it has won Best Fuel Economy vehicle award.

In 2003 Civic Hybrid was recognized among top ten Greenest Vehicle by American Council for an Energy Efficient Economy.

Second generation (2005-2011)

With increase in consumer awareness and increase in energy saving vehicles Civic Hybrid second generation had gone through remarkable changes.

Design and Features

First change was eighth generation civic that introduced “two-tier” instrument panel. In most of its markets it came with Anti-lock brakes, power window and total six airbags which included side and curtains. Secondly to generate more power new fourth generation ‘Integrated Motor Assist’ was used to be able to generate up to 20hp [2] .

To give consumer more value for their investment engine has gone through changes. Three stage i-VTEC and Variable Cylinder Management (VCM) permitted deactivation of all four cylinders when the vehicle is running at low speed and run vehicle on electric power. Consequently, energy wastage during break improved by 10% and engines main output increased to 93hp at 6000 rpm.

Honda has increased Civic’s electric motor power output by 50% to 20hp at 2000 rpm compared to the first generation. To provide greater efficiency motor speed controller inverter is integrated with motor’s ECU for precise control. Size of output battery has also increased 30% with output availability of 158.4V. Vibration resistant battery box is designed to provide better cooling performance and longer reliability.

In the display dash board a digital display is integrated to show how much electricity is transferred to the batter or how much is consumed. When car breaks on moderate speed then maximum green bars are shown in display to indicate power saving. ‘Car and Driver’ system in car was improved compared to previous generation to offer faster, greater refinement which would maintain the car to be quitter in highway speed and revised suspension to handle bumps in a better way [3] .

Fuel economy

To understand fuel efficiency of the hybrid civic, its automatic transmission can be compared to Civic sedan of 2006. The Civic hybrid provides better fuel economy in city driving as much as 63% and 27% in highway.

Reception and Awards

Motor Trend Car of the Year award 2006

Winner of the World Green Car 2006

Alternative Power Vehicle Award 2006 by AJAC

Third generation (2011- )

The third generation of Honda Civic hybrid was launched in the US in 2011 and Canada in 2012. It’s engine compared to both first and second generation is bigger and thus is able to generate more power. Its improved iVTEC 1.5 litre engine is capable of producing 90 hp with 97 lb-ft of torque. Lithium ion battery replaced nickel metal hydride battery. Larger engine replaced old 1.3L engine. EPA rating for Civic Hybrid 2012 is 5.3L/100km for city and 5.5L/100km for highway.

This generation hybrid has parallel Integrated Motor Assistant (IMA) equipped with advanced 20kW lithium-ion battery. This is a new addition for Honda hybrid series. This battery size was improved to give consumers more usable space in the vehicle. This new battery is 9kg lighter compared to older ones, uses 36% less space and is 5kW more powerful. Moreover capacity of battery has gone through development from 35kAh to 100 kAh.

This third generation has also seen improvement in aerodynamics and integrated Honda ‘ECO’ Assist Technology. This ECO platform is just an information system dedicated to help the driver to follow a more fuel efficient driving style by adopting fuel efficient driving technique. This technology has improved fuel economy of Honda Hybrids in Japan by 10%.

Evaluating markets for HEV (Hybrid Electric Vehicle)

Hybrid vehicles are diffusion of multiple technologies hence the marketing techniques are diverse in nature. However to capture insight to key marketers data available from US and Japan market is used here.

Figure 1. Sales of HEV in the USA

Source: Teske (2006) [4] .

Below diagram depicts hybrid market in Japan.

Figure 2 : Hybrid Vehicles Usage in Japan

Source: jama.jamanetwork.com/issues.aspx?year=2006

Hybrids are an emerging technology with well acclaimed dominant design which is supported by strong environmentalist lobby.

Greene, Duleep & McManus (2004) carried out a survey to investigate people’s perception on hybrid and traditional vehicle market. They expounded developments for 2008, 2012 and beyond concluding hybrids will never be a market leader. These vehicles will be limited and expectations for sales will remain below anticipation.

Figure 3 : “Optimistic” scenario Market Share of Hybrid in 2012

Source: Greene, Duleep & McManus (2004).

Is Honda Civic Hybrid a better alternative? From Innovation Marketing Perspective

From a marketing point of view, hybrids are costly solution to be environment friendly as it combines electric and gasoline engines and still is a pollutant emitter. In US Hybrid Honda Civic is sold with a price tag of extra 2500 USD compared to the gasoline counterpart. Ashley (2002) commented Hybrids must be subsidized by OEMs so that it becomes affordable at purchasing level. Research has indicated that despite being costly these hybrids are cheaper to run in longer terms.

Figure 4 : Real Hybrid Mileage Database

INCLUDEPICTURE “http://www.greenhybrid.com/compare/mileage/graphs/index.png?system=US” * MERGEFORMATINET INCLUDEPICTURE “http://www.greenhybrid.com/compare/mileage/graphs/index.png?system=US” * MERGEFORMATINET INCLUDEPICTURE “http://www.greenhybrid.com/compare/mileage/graphs/index.png?system=US” * MERGEFORMATINET

Source : http://www.greenhybrid.com./

Recent increase of fuel prices made consumer decisions fall for car’s fuel economy. As per consumers mind even if the initial costing are higher but if it saves them money in terms of fuel consumption then it will be a worthwhile financial investment.

Many first world nations offering tax credits for hybrid cars. US introduced credit upon purchase of HEV car which reduces higher purchase price. Resell value of hybrids are still vague due to lack of available information. From secondary sources reselling of hybrids generates higher value than traditional vehicles because of positive word of mouth and high demand but limited offers.

US market study showed generally just purchasing a HEV does not guarantee financial benefits. However, Datamonitor website’s (2005) research on France market shows a different scenario where hybrid vehicles were in a much favourable cost efficient position because of low fuel cost and tax credit.

Table 1 : Comparison of total cost of hybrid over 4 Years [5] 

It is clearly evident from the table that the financial benefit is less than impressive so what makes people buy hybrids; to get to the answer Topline Strategy Group (2013) researched and found out it is not just the fuel economy that consumers are after it is the social, environmental virtue that pushes them to buy hybrids. Driving a hybrid in US is often seen as socially responsible by many consumers. Early adopters Toyota and Honda made many successful campaigns through which the emotional attachment came into place. Hence the image associated with driving a hybrid also feeds into driving force to buy a hybrid.

Situation Analysis of Honda:

Automobile industry is very mature with and based on gas engines (Richardson, 1993). Honda differentiates with a value based strategy.

Internal Analysis

Strengths

Honda is highly reputable for its R&D in automobile industry. Honda builds performance oriented good quality reliable vehicles. Honda is associated positively with cutting edge technology.

Weaknesses

Using latest technology meant they had to occasionally recall their products which affected brand equity. Higher budget on R&D led to decline in operating margins also market share in continuously threatened by Toyota and Nissan lineups.

Opportunities

Currently there is a upsurge on environment friendly vehicles with Honda’s R&D reputation if it can capture the market share then they can capitalize with its hybrid range.

Threats

Oil and raw material price is rising which may decrease demand for auto vehicles thus leading to competitive market with strong rivalry form Toyota.

External Analysis

Political –

Lobby groups are continuously pushing governments to give tax incentives to hybrid buyers. Kyoto accord had renewed focus on reduction of pollution.

Economic –

Fuel price is on the rise and it is affecting consumers. Search for alternative is ongoing.

Social –

Consumer are nowadays more conscious about environment pollution. People are becoming conscious about environmental damages caused by pollution. As hybrids are nature friendly this can be a good area of business for Honda because they can get more consumers who are ready to pay for a newer green technology.

Technology –

Recently there has been huge investment in R&D for hybrids. Hence it has seen prominent achievements in cost reduction and efficient management of resources.

Network Model

User Network –

Identified user network for Honda Civic Hybrid are those who can foresee benefits of paying premium price for an environment friendly product.

Complement Network –

Facilities that enable the ownership, operation and maintenance of any automobile are the complement network includes the dealers, gas stations and service.

Producer Network –

Producer network includes part suppliers and other stakeholders associated with production of Honda Civic Hybrid.

By using Identify -> Differentiate -> Interact -> Customize model methodically segmentation can be done in a way that current target market breaks into smaller market segments that can be targeted individually (Meyer, 2007). At this customize stage of innovation marketing Honda Civic Hybrid needs to show flexibility in offering customers high value by customization options also keeping the low margin customers happy by driving down cost to serve.

Resource Identification

To relate Honda Civic’s innovative approach towards its hybrid version with theories SWOT and network analysis was done. From there some of the critical success factor of this hybrid product can be identified that Honda needs to work on to be successful. Additionally these can be compared to core competencies of Honda.

Three critical factors are involved here ‘reliability’ , ‘excellent value for investment’ and ‘build quality’. Honda is capable to provide all three but for the hybrid version there can be issues. As hybrid engines are new thus car buyers have well-constructed fear as how the engine will perform in long term. Also resell value of the cars is another issue to ponder upon. These hybrids are fairly new so investors have to wait and see how it resells.

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Hybrid cars initially did not make up savings only by gasoline cost savings. The price range is only $1000-$2000 extra which minimizes price gap between traditional and hybrid cars. Though it costs about $4000-$5000 extra but Honda is strategically subsidizing the price so that it come across as affordable to customers. In terms of affordability Honda already has good reputation to make quality automobiles.

Critical Analysis of Honda Civic Hybrid and Marketing

Leonhardt (2006) argued that environment friendly vehicles are often economically dearer. So to justify extra pricing needs use of extensive marketing tools to convince people to buy the product.

Before manufacturing Civic Hybrid, Honda carried out market research to get idea about what consumers wants from Honda. After launch of the product there were dedicated websites and e-brochures. Consumer could record there interest and subscribe to the website. From there Honda could track interested users. Honda was also active in social networking platform to communicate with millions of users.

Figure 5: Technology Adoption Lifecycle [6] 

As per the technology adoption lifecycle after crossing ‘The Chasm’ Honda needed more integrated marketing to get to the consumers (Evans, 2003). During 2003-2004 Honda managed to outperform industry leader Toyota in sales (Concepcion, 2011). This was possible as they had the best engines of that time which would give best millage and they used mass marketing via multiple platforms.

During the years in 2007 onwards Honda Civic Hybrid became a fashion statement as it would indicate the owner is environment supporter. Design of the hybrids changed since then and it was more of a style icon endorsed by numerous Hollywood stars.

In recent years Civic hybrid sales has moved from early adopters and innovators to mass consumers with slightly high income group being the most interested group. Still like competitor Toyota, Honda is using penetrated pricing to get the market share and eventually lowering price of old versions (Hasegawa & Kimm, 2008).

Conclusion:

To sum up, after thorough investigation of Honda Civic Hybrid it can be said that Honda build upon their brand equity and market leading manufacturing techniques, equipped with mass marketing lead to its success. Civic hybrid has evolved from its launch through the years. This enabled Honda to capture more market share and move its focus from early adopters to mass consumer. In coming days Honda will come up with more variants which would establish them as either market leader or second leader after Toyota.