The tale of Honda’s rise and fall in the UK and Europe is a chastening one. At one time, the firm was viewed as a genuine alternative to BMW, led by engineers making cars with cutting-edge petrol engines and sharp design.  In the 1970s sales success with the Civic in the US was pioneering, while a joint venture with Rover in the 1980s broke new strategic ground.  So when the Swindon plant opened in 1992 with the capacity to build 150,000 cars a year, just as Europe’s single market was launched, Honda looked set to conquer the continent.  Yet 27 years on, the relationship with Europe has soured: sales are in the doldrums, with just 150,000 cars shifted last year, and the £2 billion Swindon factory will close in 2021. Civic production will also stop at its Turkish plant, although “business operations” will be maintained.  So how did it all come to this?  Sales  Remember how well-loved Honda was in the late 1980s and early 1990s? There was the amazing NSX sports car, the McLaren-Hondas that won everything in Formula 1 thanks to their turbo V6 and normally aspirated V12 engines, and the joint venture with Rover, all contributing to a solid toehold in Europe.  Back in 1990 Honda was selling 155,000 cars in Europe, compared with Nissan’s 371,000, Toyota’s 340,000 and Hyundai’s 18,000. After opening in 1992 with the Accord, the Swindon factory steadily boosted sales, rising to 225,000 in 1998.  These were not easy years, however. BMW acquired Rover, rivals such as Hyundai were moving faster and Honda’s own diesel engine was a decade from production. In the meantime, it bought in its oil-burners from Rover.  A real turning point was 2000 – the year Hyundai sold more cars in Europe than Honda.  Honda didn’t have its own diesel engine until 2003 – the inevitably brilliantly engineered i-CDTI. But by then its Korean competitor was selling 100,000 cars per year more, while Nissan and Toyota were smashing the market.  Sales of diesels and rising demand for SUVs did lift Honda to its European sales peak of 313,000 units in 2007 – just before the collapse of Lehman Brothers. The manufacturer’s response to the financial crash was, reasonably, defensive. One former insider said: “Honda is fiercely independent and the management refused any idea of bail-outs. But it raised the issue of how vulnerable the company was to a shock. So instead, they pulled back and shut the second production line at Swindon.”  Knocking Swindon back to a maximum of 150,000 units was never going to end well. “The minimum efficient volume is around 250k,” says David Bailey, a professor of industrial strategy at Aston Business School.  Ever since, European sales have been on a steady – some insiders say ‘managed’ – decline, levelling out at 140,000-150,000 units in 2017/18 – pretty much where Honda’s European sales started in 1990. In fact, when Swindon was at the height of its powers, and as the second plant was opened in 2001, Honda was discussing whether to aggressively target 150,000 units per year in the UK alone. But management baulked and the moment to create an impregnable sales base for Swindon passed by without being seized. Insiders believe UK sales could be stronger, but senior management has repeatedly turned down requests to supply more right-hand-drive cars. “Honda refused to chase daily rental and fleet sales, so that cuts you out of a large part of the UK market, where rivals like Hyundai are selling a lot of cars,” says one source.  UK sales peaked at 106,000 in 2007 but have subsided back to around 53,000. Consequently the model range has diminished, limited in the UK to four volume models: the Jazz, Civic, HR-V and CR-V, plus the NSX super-sports car and the Civic Type R hot hatch.  Honda Motor Europe senior vice president Tom Gardner contends the brand has performed well: “Honda has maintained consistent UK market share over the past five years, in excess of 2%, highlighting strong brand presence in the UK, with a committed dealer network offering outstanding customer satisfaction.” However, insiders and experts identify weak product planning as one of Honda’s missteps. Among them are the Pilot 5+2 SUV not making it to the UK in 2002, the on/ off Civic Tourer estate, the niche model strategy, on/off hybrids and being slow to market with diesel at a time when it was a must-have in every manufacturer’s armoury. Another example is when, having built a customer base for the Stream and its FR-V successor, Honda pulled out of the MPV market without a replacement, deserting the loyal customers the two models had won.  “Fundamentally, Honda has misjudged the European market, and they simply don’t have the volume to justify production here,” says Bailey.  Management  Talking to former Honda employees, there is a feeling that a switch was flicked around the time of the 2008 financial crisis. “Honda lost its spark. The model range definitely lost its spark,” says one former executive who
Origin: The Swindon factory closure: how Honda got Europe so wrong