Honda positions HR-V as compact SUV to justify higher price

Honda‘s new HR-V has been positioned to compete against Nissan’s Qashqai rather than Renault’s Captur.

LISBON — Honda is positioning its new HR-V in Europe to compete in the compact SUV/crossover segment and pricing it accordingly, even though the model is built on the same global subcompact platform as the Jazz hatchback.

The HR-V starts at 17,995 pounds (25,070 euros) in the UK, which is expected to be its largest European market. This is above the 14,295 pounds UK starting price of Europe’s top-selling subcompact SUV, the Renault Captur, but below the 18,545 pounds starting price of the Nissan Qashqai, the European compact SUV segment leader.

Honda hopes the higher pricing for the HR-V will offset costs of importing the model from its new plant in Mexico.

Honda UK Managing Director Philip Crossman said building the HR-V in Mexico, where costs are largely incurred in U.S dollars, poses a challenge for sales in Europe because of the unfavorable dollar/euro exchange rate.

By presenting the HR-V to customers as a slightly cheaper alternative to the Qashqai, rather than as an expensive option to the Captur, Honda hopes to generate additional revenues to offset the exchange rate difficulties.

Honda defended this strategy on the grounds that the cabin space in the HR-V matches that of larger SUVs such as the Qashqai.

The HR-V is a new addition to Honda’s lineup and it revives the HR-V name that the automaker last used in the region in 2006. Within the Honda range, the HR-V fits below the CR-V, which is at the larger end of the compact SUV class.

Honda said it had created more cabin space in the HR-V by moving the fuel tank into the center of the car below the front seats. It also said the HR-V’s trunk space of 470 liters for the two-wheel-drive version (four-wheel-drive will not be sold in Europe) was achieved by removing the spare tire under the trunk floor. The Qashqai has trunk space of 430 liters.

The HR-V will go on sale in Europe in September. It will be sold in Europe with a choice of a 130-hp 1.5-liter naturally aspirated gasoline engine or a 120-hp 1.6-liter diesel with CO2 emissions of 104g/km. There are no plans to import a hybrid version currently sold in Japan, where the HR-V is badged the Vezel.

Honda has struggled in Europe in recent years. Its sales in EU and EFTA markets peaked at 313,484 vehicles in 2007, giving it a 2.0 percent market share. But last year’s sales of 139,712 represented a share of just 1.1 percent.

The company’s only factory in western Europe, in Swindon near London, has been in difficulty as a result. Although it has an annual capacity of 250,000, the plant only built 140,000 cars in 2013. Last year the company stopped using one of Swindon’s two production lines, and dropped from three to two shifts a day on the remaining line, which builds the CR-V, Civic and UK versions of the Jazz.

Crucially, the decision has been taken to build the HR-V for the U.S. and European markets at Celaya, Mexico, while Jazz models for mainland Europe are transferring to Japan. According to Ian Fletcher, senior analyst at IHS Automotive, these production decisions makes sense economically because most of the HR-Vs built in Mexico and the Jazz models built in Japan will be sold in markets that are bigger for Honda

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