Honda Adds Crossover to Lineup as Demand Rises for Small SUVs

Honda Motor Co. (7267), maker of the best-selling sport utility vehicle in the U.S., is starting sales of a new crossover model to tap rising demand for smaller SUVs.

The model, named Vezel in Japan, shares some of the underbody structure of the Fit compact car and features coupe-like styling for its exterior. Sales will begin in Japan tomorrow with a starting price of 1.87 million yen ($18,147) and in overseas markets including the U.S. next year, said Yoshiharu Itai, the model’s chief engineer.

The model is Honda’s first offering in the compact-SUV segment, where global demand is expected to more than double to 2.7 million vehicles in 2016 from 2013, according to IHS Automotive. Honda, whose CR-V is the top-selling SUV in the U.S., said this year it aims to boost worldwide compact-car sales to 1.5 million vehicles by 2016.

“This is one of the fastest-growing segments in the auto industry,” said Yoshiaki Kawano, a Tokyo-based analyst at IHS. “Growth will mainly come from emerging markets including China and India, while mature markets also start to embrace them as an alternative to traditional hatchbacks.”

The car may help Honda take market share from segment leaders including Nissan Motor Co. (7201)’s Juke and Fuji Heavy Industries Ltd. (7270)’s Subaru XV in Japan, and Ford Motor Co.’s EcoSport and Peugeot SA (UG)’s 2008 globally.

Main Product

In Japan, Honda will sell a hybrid and a gasoline version of the car, each equipped with its new 1.5-liter direct injection engine. The hybrid Vezel delivers fuel economy of 27 kilometers per liter, Honda said.

“The model will be our main SUV product for the domestic market,” said Kazuto Kashiwai, head of Honda’s marketing team for the model in Japan. “It will make up for Honda’s weakness in the SUV segment, where our CR-V is seen as too big for Japan.”

Japanese demand for small crossovers will rise 38 percent by 2016 from now, becoming one of the few bright spots in a shrinking car market, IHS said.

Honda makes the car at its Yorii plant in Saitama prefecture, north of Tokyo, where it also builds the Fit. Production of the car will start at Honda’s Mexico plant next year for sales in North America, Itai said.

In China, Honda will introduce two variants of the crossover with partners Dongfeng Motor Corp. (489) and Guangzhou Automobile Group Co. to challenge Great Wall Motor Co. (2333)’s M4, the top-selling crossover in the world’s largest auto market.

To contact the reporter on this story: Ma Jie in Tokyo at jma124@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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