Honda's Insight lacks it

By Ken Bensinger

July 28, 2009 12 AM PT

Honda’s Prius-killer is looking a lot like road kill.

When it debuted in March, Honda Motor Corp.’s retooled Insight hybrid looked to be the first serious challenger to the Prius, Toyota Motor Corp.’s ecological wunder-car. Graced with a low price, 40-mpg-plus fuel economy and the Japanese automaker’s reputation for quality, the Insight even looked like the Prius.

Instead, all the Insight has delivered is a flurry of bad reviews and four months of dismal sales capped by a thorough battering at the hands of the Prius, whose third generation was launched in the U.S. last month. Increasingly, the Insight is looking like the latest in a series of hybrid frustrations for Honda.

“We’re all pretty disappointed. We thought we had the next hit on our hands,” said Don Marino, general manager of Honda of Santa Monica.

Marino said he was selling five to 10 Insights a month, far less than the 30 or so he expected to move.

Throughout the country, Americans bought 2,079 Insights in June, bringing total sales of the streamlined hatchback since March to 7,524, according to Autodata Corp. At that rate, Honda will sell less than a third of its goal of 90,000 in the first 12 months.

By comparison, the higher-priced Prius was snapped up by 12,998 drivers last month. Since March, Toyota has sold 40,398 of the gas-sippers.

The poor sales figures are all the more humbling because Honda was the first automaker to bring hybrids to the U.S. a decade ago, with an earlier version of the Insight. Yet although Honda products almost always score well with consumers and car enthusiasts, it just can’t seem to get green right.

Weak sales forced the Japanese automaker to abandon an earlier two-seat Insight. Its powerful six-cylinder Accord hybrid had unimpressive gas mileage and was killed after three years. Combined, the two vehicles mustered scarcely 45,000 deliveries worldwide.

Meanwhile, the hybrid version of its popular Civic sedan, which Honda says it originally introduced to battle the Prius, has logged just a fifth as many sales as its rival.

“Honda just hasn’t had a cogent hybrid strategy at all,” said Eric Noble, president of Car Lab, a product planning and research firm.

Noble isn’t sure why Honda has stumbled, but what is clear is that other automakers are gaining ever-larger footholds in the hybrid market. Ford Motor Co. is making huge strides thanks to its highly regarded new Fusion hybrid, which, despite a price tag nearly $10,000 more than the Insight’s, had June sales on par with the Honda offering. General Motors Co. and Nissan Motor Co. both offer hybrids. Germany’s Daimler, maker of Mercedes-Benz, and even South Korea’s Hyundai Motor Co. are preparing to enter the hybrid race.

Toyota remains the king, with a fleet of six hybrids including Lexus models, and the hybrid-only Lexus HS sedan on the way. Honda’s next hybrid offering, meanwhile, is a head scratcher: the CR-Z, a two-seat sports coupe aimed at one of the smallest-volume segments of the market.

Honda contends that it never intended for the Insight to compete with the Prius, which has logged more than 1.25 million sales worldwide since it first went on sale in Japan in 1997.

Instead, spokesman Chris Martin said, Honda specifically targeted the Insight at a lower price point -- it starts at $19,800 compared with $22,000 for the Prius -- in hopes of winning over a new segment of penny-pinching would-be hybrid buyers.

Honda’s annual sales expectations of 90,000 units are half those of Toyota’s for the Prius. But with gasoline prices low right now, Martin said that price-conscious buyers are waiting on the sidelines.

“Insight is the value hybrid, whereas the Prius is designed to be more whiz-bang,” he said.

Martin contends that the two cars have little in common, and Consumer Reports appears to agree. It rated the Insight second to last among small hatchbacks in its August issue, behind the Chrysler PT Cruiser and the Scion Xd. The magazine critiqued the Insight’s handling, lack of interior room and cargo space, calling it a “noisy car with a stiff ride and clumsy handling.” The Prius, meanwhile, ranked third.

And while the Insight gets a respectable 41 mpg, the new Prius reaches 50 mpg -- thanks in part to its more advanced hybrid technology. The Prius has a powerful electric motor that by itself can propel the car at speeds of up to 34 mph. The Honda, on the other hand, uses the electric motor as an assist; its gas engine is always running when the car is in motion. The Prius also has more horsepower, seating room and trunk space, plus snazzy features like a solar-powered sunroof.

“Honda has learned from its mistakes in the hybrid market, but maybe it’s learned the wrong lessons,” said Jake Fisher, senior engineer at Consumer Union, which publishes Consumer Reports.

The Prius and Insight do have one thing indisputably in common: looks.

The Prius has drawn legions of fans, including celebrities such as Leonardo DiCaprio, with its quirky, aerodynamic shape reminiscent of an egg on wheels. When Honda revealed its Insight at the Paris auto show last fall, it was a case of deja vu.

“Everybody calls it the Honda Prius,” said Alan Katz, owner of a Long Beach business that offers wedding officiant services. After considering both vehicles, he chose the new Prius.

Honda’s dealers have taken note, and some have urged the automaker to reconsider its marketing strategy.

“Honda needs to start telling the price story,” said Dave Conant, president of Norm Reeves Honda, with three dealerships in the Los Angeles area.

But the Insight’s price edge is about to get narrower. Toyota plans to release an entry-level Prius in September priced at $21,000, just $1,200 more than the Insight.

“Getting into a price war is not going to work for Honda,” said Wes Brown, vice president at auto marketing firm Iceology in Los Angeles. “They have to find a way to convince people to buy this car, and I don’t know what that is.”

Of course, the Insight does have its fans. It has been a big hit in Japan, thanks in part to government incentives, and was the top-selling vehicle in the country in April, selling over 10,000 in one month.

And because of Honda’s reputation for quality, earned over decades of selling dependable Civics and Accords, many brand loyalists in the U.S. couldn’t wait to get their hands on the Insight, placing orders with dealers months before the model came out.

Peggy Etheridge, a financial advisor in Richardson, Texas, said her experience owning four consecutive Hondas made the decision easy.

“The Prius felt too weird to me, where the Honda felt like a regular car,” said Etheridge, who bought her Insight, complete with custom leather interior, a few weeks ago.

Industry experts, however, aren’t so easily impressed.

“In a world where other hybrids are getting better and better, Honda is increasingly in a disadvantaged position,” said Jim Hall, managing director of industry consulting firm 2953 Analytics. “The Insight is not going to reverse that course.”

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BEGIN TEXT OF INFOBOX

Insight versus Prius

HONDA INSIGHT

Base price: $19,800

MPG: 41

Horsepower: 98

June U.S. sales: 2,079

Sales expectations (annual): 90,000

Consumer Reports ranking (for wagons/hatchbacks): 21st out of 22

TOYOTA PRIUS

Base price: $22,000