Honda puts redesigned Fit subcompact at centre of global expansion

TOKYO Fri Jul 19, 2013 8:26am BST

A woman walks past a Honda Fit Hybrid car during the media preview of the 10th China International Automobile Exhibition in Guangzhou November 22, 2012. REUTERS/Tyrone Siu

A woman walks past a Honda Fit Hybrid car during the media preview of the 10th China International Automobile Exhibition in Guangzhou November 22, 2012.

Credit: Reuters/Tyrone Siu

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TOKYO (Reuters) - Honda Motor Co (7267.T) is making its remodelled Fit subcompact the pillar of an ambitious global expansion, elevating it to a status now enjoyed by its flagship Civic as it shifts focus to emerging markets and deploys a low-cost parts sourcing scheme.

Chief Executive Takanobu Ito has set an aggressive target to boost the No.3 Japanese automaker's global car sales to 6 million vehicles or more annually by the year to March 2017 from 4 million last year. Half those sales will be in emerging markets.

The redesigned Fit series, popular in Japan and in emerging Asian markets where it is sold as the Jazz, will account for one-quarter of the 6 million target - about the same ratio that the Civic holds now.

Honda aims to double sales of Fit series vehicles to 1.5 million in the year ending March 2017 from 760,000 in calendar year 2012, Vice President Tetsuo Iwamura has said.

The 12-year-old Fit series includes hatchback and sedan models, with an SUV to be added in the latest makeover. The first model in the redesigned series, a hatchback, will go on sale in Japan in September.

While Honda is also mulling developing cars based on its Japan-only "kei" microcars for emerging markets, Ito has singled out the Fit, with its track record of strong sales in Asia, as crucial to achieving the expansion target.

But for his strategy to succeed, Honda needed to boost the Fit's profitability given that small cars tend to bring in less money than bigger models.

"That's a big problem for Honda because we are increasingly reliant on small cars, but we were able to improve profitability for the Fit series," Hiroshi Takemura, who oversees Honda's small car operations, told Reuters in an interview last month.

For the redesigned Fit, Honda revamped its parts sourcing and vehicle development, allowing it to buy the cheapest parts from around the world in large volume and cut parts procurement costs by 20 percent, he said.

It involved engineers from around the world in the early stages of product development to reflect different regional requirements, such as with air conditioning systems, and to make it possible to source cheaper, locally produced parts, he said.

Honda also cut gaps in launch times for the Fit across regions and across vehicle types such as hatchbacks and sedans, boosting production volumes and allowing assembly plants to buy parts in larger lots for less cost.

The redesigned Fit hatchback, which competes with Volkswagen AG's (VOWG_p.DE) Golf and Toyota Motor Corp's (7203.T) Yaris, will go on sale in North America and Asia only a few months after the September debut in Japan. That is much less than the year or more lag for past Fit models.

The Fit SUV will follow the hatchback in Japan late this year, with the Fit sedan, sold mainly in emerging markets as the City, hitting showrooms last.

Honda is also revamping its one-motor gas-electric hybrid version of the Fit hatchback, boosting fuel efficiency to surpass that of Toyota's Prius C, Honda spokesman Tsuyoshi Hojo said.

Honda will offer the new hybrid in Japan but has yet to disclose where else it may be sold. The existing model is sold in Europe, Thailand, Malaysia and China as well as Japan.

(Editing by Ed Klamann and Chris Gallagher)

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