Honda Today

HONDA TODAY

Masami Kamimura has several decisions that he must make regarding the Honda Today and its future in the current Honda lineup. In the past few years, Honda invested ~5 billion in the Today and its R&D and production. Even with 22% of the market share for the Today, its total sales were only 100,660 units for the 1987 sales. The Honda today is known for its small size and compact vehicle. It is an economy car to cater to the low-middle class families. The return on this car is marginal compared to larger more luxurious cars. It would not be beneficial to redesign this car and start from scratch.

Honda has a one-year deadline to meet for this project before the new tax laws are in effect. Honda has a unique approach to redesign a car from the ground up. Not only do they redesign the body and chassis, they also build a new engine for the new car. They feel that it is the best way to get the best experience of the “new” car.  There is not enough time for Honda to completely redesign the Today with the new frame, chassis, and engine. The average time is at least 18 months. Also if engineers are pulled away from other projects to redesign the Today, it could hurt future products and affect the market growth in those car sectors.

I believe the best approach in this case would be for Kamimura to choose the cost effective approach and increasing the engine displacement option. He would be able to guarantee that the Today would be ready in time before the new tax laws, as well maintain the image for Honda. If they were not able to release a new resigned model of the Today in time, they could lose some of the market share to other competitor and it could even damage its image.

I feel that Kamimura should keep the car the same, and invest in the minor tooling changes needed to make the engine with 650cc. That would be the most cost effective way, after already investing over 5 billion into the development of the current Today. I know this is not the traditional “Honda” way, but this could be seen as an “upgraded” model to the current 550cc model, instead of a completely new design. Also if you look at Hondas current lineup of cars, you will see that many of the cars have different engine sizes. Even though they are based on the same design, they still have different engine sizes. (Exhibit 1B)