Carrying the Torch with Our Own Hands

To cultivate a market for its automobile products, Honda needed to build a sales network. In 1963, the company recruited from among its motorcycle dealers in Japan who were willing (and able) to handle automobile sales, and designated them as its initial auto dealers. Wholesale distribution of Honda automobile products was then targeted to motorcycle dealers wishing to sell automobiles. As such, when Honda entered the automobile market, there were no dealers specializing in automobile sales; dealers sold both motorcycles and automobiles.
Honda began organizing its automobile dealers, first in Tokyo, and more than 1,200 shops in the metropolitan area alone began sales of Honda automobile products as authorized AHSSA^*1 dealers.
A direct sales system, also known as the “Toyota system,” in which wholesalers and retailers are integrated, was common at the time. On the other hand, Honda introduced a wholesale system and established a clear division of roles, with distributors and Honda sales offices focusing on wholesale, and dealers throughout Japan purchasing vehicles from distributors and Honda sales offices and selling them to customers.

However, Honda motorcycle dealerships at that time had the advantage of being close to the local community, they were too small to sell automobiles, and many of them were not equipped to service automobiles; therefore, after sales service and repairs were performed mainly by Honda distributors. In many cases, even Honda distributors did not have sufficient capability to perform the repair, thus the vehicle had to be brought into independent repair shops. In addition, the DOHC engine, which was revolutionary at the time, was shunned by repair shops due to the difficulty in servicing it.
To address such issues, in 1963, Honda began building a nationwide network of its own service and repair facilities based on the All Honda Service Factory (AHSF) concept. In February 1963, the first Honda-SF (Honda Service Factory) was established in Shirako, Saitama Prefecture, quickly followed by the establishment of more Honda-SF facilities throughout Japan, including Oshiage, Sapporo, Natori, Neyagawa, Fukuoka, and other locations.
Honda also introduced the industry's first^*2 long-term warranty system, which provided a two-year, 50,000km warranty on all new motorcycle and automobile models. This system was designed to promote Honda vehicles as high performance, yet durable and reliable, generating peace of mind for buyers and sellers of Honda products. The pursuit of performance and quality was a strategy to outperform the leading manufacturers, and it was the company’s main goal.

The bill on Temporary Measures to Stimulate Specific Industries that had been submitted to the Diet was scrapped and, as a result, Honda was able to enter the domestic automobile market in earnest, and began its own path rather than following others, based on the idea of “carrying our own torch” in creating technology, products, and sales structure.
In October 1965, Honda opened its first showroom (Honda SR) as a business meeting venue for AHSSA dealers in its Tokyo branch in Ikebukuro. In April 1966, Honda established Honda Sales Research Co., Ltd. to study various sales issues and reflect them to sales policies, as well as to understand the demand in the automobile market. This was a measure based on the Honda “Three Reality Principle,” where Honda itself learned the ideal direction of automobile sales from the front line to support dealers who had just started up and did not have expertise in automobile sales. At the same time, Honda Shinpan Co., Ltd. (consumer credit company) was established in anticipation of the spread of automobile loans, uncommon at the time, and Honda Used Car Sales Co., Ltd., was created to strengthen sales capabilities through trade-ins. In December of that year, Honda established 12 automobile sales offices nationwide, and quickly established a system to support sales at retail outlets.

Striving to be a Socially Responsible Company
as the No.1 K-car Manufacturer

Offering Cars that Meet the Customer Needs of the Times:
Shifting to Small Car Sales

In 1969, Honda launched the four-door H1300 sedan, marking its beginnings as a small passenger car manufacturer, followed by the introduction of another small car model, the Civic. With a strong will to meet customer demands and expectations, Honda made dramatic advances in product quality in a short period of time. At the same time, in order to deliver excellent new products to as many customers as possible, Honda evolved its sales system aiming to expand the “Joy of Buying” for more customers.
In the 1970s, while automobiles became more affordable leading to the development of traffic networks, this also brought more pollution, traffic accidents, and energy problems. In 1970, the U.S. Clean Air Act of 1970, the world's most stringent environmental regulation, was enacted in the U.S. mandating that emissions of carbon monoxide (CO), hydrocarbons (HC), and nitrogen oxides (NOx) be reduced to less than one-tenth of their former levels. In October 1972, Honda announced the CVCC engine, the world’s first engine that met these standards without use of a catalytic converter and, in December 1973, the Civic CVCC was launched.
The Civic series, which satisfied societal needs for comfort, safety, and environmental performance, won the Car of the Year award (sponsored by “Motor Fan” magazine) for three consecutive years from its debut in 1972.
With the first oil crisis and global energy issues becoming more serious, the Civic, with its low fuel consumption and low emissions, became the car the times demanded. Honda started an automobile dealership system fully equipped with showrooms and maintenance shops, a customer management system, and a sales plan. Honda also launched a compact dealership system in conjunction with the launch of the Civic, steadily building a sales structure tailored to customer needs.

Pursuing Customer Satisfaction with SED Development System
and Aiming to Launch Full-Fledged Automobile Dealerships

With a boost from the global preference for compact cars, in July 1976, four years after its launch, the Civic reached cumulative production volume of 1 million units. In May, a new compact car, the Accord, a hatchback with a CVCC engine, was launched catering to new lifestyles including the spread of the two-day weekend and the development of an expressway network in Japan. The SED Development System^*6 introduced during Accord development would become the foundation for later hits such as the City and Prelude.
Despite the market launch of the Accord, small car sales in Japan were sluggish. To leverage sluggish sales, Honda announced the “Ⓔ Plan,” to enhance the capabilities of the sales force and dealerships and to cultivate more customers.” As part of this plan, Honda strengthened its existing authorized dealerships, improved its after-sales service and used car sales system and capability, and built new dealership locations in underserved areas all across Japan.
To further expand sales volume, Honda launched the Verno dealership channel in 1978, exclusively selling the Prelude, a personal specialty car (sports model). Verno was the first attempt by Honda to strategically plan store openings. The company’s sales network was no longer limited to motorcycle dealers turned auto retailers, but began to become a full-fledged automobile dealership network. Furthermore, in 1981, Domestic Automobile Operations was established to focus the entire organization and Honda associates on satisfying customers.
The City, created by a development team with an average age of 27, launched in 1981, and was the catalyst Honda needed. It was an immediate explosive hit, attracting young customers. Honda automobile unit sales in Japan reached 330,000 units, a significant increase from 270,000 units in the previous year. It was the first time in 11 years that Honda automobile sales in Japan recovered to the level above the 300,000-unit mark.

Revamping the Sales Network into Three Channels

Demonstrating the Collective Strength of “All Honda” to
Overcome Recession After the Economic Bubble Burst

In 1990, when the NSX and second-generation Legend / Legend Coupe were launched (the Coupe began sales in 1991), Honda announced its fourth mid-term plan under the slogan “Simplicity, Concentration, Speed,” and began full-scale efforts to strengthen its domestic automobile business, centering on strengthening sales. At the time, metropolitan areas^*10 accounted for 47% of the nation’s overall automobile market. However, the composition of Honda sales in metropolitan areas was only 39%. In order to strengthen sales in this critical area, a large number of associates from the domestic automobile operations were transferred or dispatched^*11 to Honda sales companies in metropolitan areas.
In 1991, Honda introduced the Beat, and the U.S.-made Accord Wagon and added a new type of the U.S.-made Accord Coupe, but domestic automobile sales were stagnant due to the economic recession that signaled the collapse of the bubble economy. At the time, the Japanese market was in the midst of an unprecedented RV^*12 boom. Honda, which had no RVs of its own, sold OEM vehicles^*13 from Chrysler, Rover, and Isuzu, but its momentum in the Japanese market was weakening.
In February 1993, Riku Iwai was appointed General Manager in charge of sales and marketing for Domestic Automobile Operations. In order to complete the “transformation to a highly effective and efficient corporate structure,” as stated in the 5th mid-term plan, he worked on the sales side to provide products and services with top-class appeal in the areas of Q, C, and D^*14. After assuming the position, Iwai spent about a month at R&D, observing the process in detail, and as a sales representative, worked to promote the creation of “Market-In”^*15 products so that market needs could be further reflected to product development.
In 1994, Honda further developed its strategy of “building products close to the customer” aimed at globalization, and set out to achieve autonomy in its four regions. Progress was made in each of its regional headquarters (the Americas, Europe, Asia & Oceania, and Japan) becoming self-reliant. In Japan, however, the appreciation of the yen and the expansion of local production led to a decline in exports, which, combined with sluggish domestic sales, resulted in a 26% decline in domestic vehicle sales (approximately 500,000 units) from the peak in 1990. Securing domestic automobile sales of 800,000 units became an essential proposition for the independence of Regional Operations (Japan).