Acura: New product fuels interest

Acura dealers were reaching deep into the factory pipeline to sell vehicles in the beginning of the 2022, but fresh product kept excitement flowing among customers.

"The launch of the new Integra really added vitality to the brand, bringing some of the younger generation, serving as a good entry to Acura," said Glenn Davis, chairman of the Acura National Dealer Advisory Board. "The high-performance aspect of the new TLX Type S and the MDX Type S with more power and better Brembo brakes gave Acura cachet."

Davis, who owns Davis Honda in Burlington, N.J., and Davis Acura in Langhorne, Pa., stepped into the role as dealer advisory chair in July when inventory was at an all-time low.

"A lot of dealers had very few or no cars on the ground at the middle of the summer, which is prime selling season," Davis said.

But he said the inventory situation is getting better and preordering, which was a prominent theme last year, has tapered.

"There's less of a need for preorders because with MDX and Integra, dealers have some on-ground inventory so we can do our dealer trades the way we've always done them to satisfy an order. But we're still doing preorders for RDX and TLX because there's still a shortage of those vehicles," Davis said.

But dealer profitability was good for the year, and that lifted dealer sentiment.

"Overall we want it to get back to normal because it's not good for our future, so we're relieved that we're starting to see more inventory and more cars. Now we just have to sell them," he said.

Davis' father, David Davis, now retired, opened Davis Honda in the 1970s and was one of the original dealers. Davis Acura, which opened in 1987, was one of the first Acura dealers.

Davis has been in the car business for four decades; he started in 1983 washing cars at his father's Honda dealership. He is on the newly formed Acura Innovation Committee, which comprises eight dealers who are working closely with Acura's assistant vice president of sales, Emile Korkor, to forge the next steps for the brand as it prepares to roll out its first electric vehicle in 2024 and launch an Acura-branded retail tool that will allow shoppers to toggle between online and in-store shopping.

Davis, 54, spoke with Staff Reporter Carly Schaffner about low inventory struggles, excitement around new product and Acura's push into electrification and digitization. Here are edited excerpts.

Q: How close are Acura's production and inventory levels to coming back in line with demand?

A: I think it's too early to tell. We have all the building blocks in place to have success — we have some inventory, and Acura has brought out some incentives. We certainly need it at this point after a year with the shortages.

What has Acura said about returning to full production?

It's a fluid situation. Some suppliers have decommitted last minute, so that affected production and our on-ground units. RDX is still short right now — they're not building enough to meet demand. We anticipate, based on our allocations, that RDX could be better in February or March, but, again, that depends on suppliers fulfilling their commitments. We'll see if that happens or not.

How are Acura dealers coping with the inventory constraints?

We tried to maximize every deal throughout the year because we only have so many bullets in the gun every month. We've reestablished the integrity of MSRP, whereas we were always below it traditionally, and that has brought the pricing and the gross per unit up. That's helped us a lot throughout the year.

We have to get back to fundamentals, which is focusing on used cars and turning inventory as well as fixed operations.

Has Acura helped its dealers with programs or tools to get through this low-inventory period?

The new products help. We did have the 2022 MDX, the new Integra and the TLX that was changed in 2021. Like every manufacturer, there were very little incentives because we were preselling it to the pipeline and there was no need. Acura also helped by offering price guarantees that maintained original selling prices for customers waiting for their cars for sometimes up to three months.

What do dealers expect in terms of inventory and days' supply for 2023?

There's a lot of talk about dealers maintaining smaller inventories. I think Acura itself wants to carry a lower day supply on the ground. The whole thing has shifted because of the shortages. The manufacturer and the dealer can do better with a little bit lower days' supply than we had in the past.

How are Acura dealerships performing from a profitability standpoint? How sustainable are current vehicle margins and profitability levels as inventory levels improve?

We've already seen some dealers discounting vehicles as inventories are growing right now. 2022 was not a record year but was close to a record for most dealers. There are definitely some headwinds coming up and I'm not sure where we're going to end up from a profit standpoint. Some of the interest rate increases are going to be offset by the subvented rates that we get from the manufacturer and there's a lot of pent-up demand, so it's hard to tell where it will settle in the next three to six months.

Acura is awaiting its first EV — the ZDX — which will come to market in the second half of 2024. How are dealers preparing for its arrival?

Acura published the requirements for different dealers in different parts of the country. There are three different levels of charging stations that dealers need. Dealers in rural areas that don't sell a lot of electric cars have the lowest requirements, and dealers in places like California and New York have the highest.

Dealers need to get the ball rolling now, as far as evaluating the amount of power they have coming into the store, if it's enough, and engage an electrician and electrical contractor and the hardware providers. The equipment, special tools and the electric chargers will all have to be installed by next fall to be allocated the ZDX.

Compared with brands that already have come to market with EVs, especially in the luxury space, do dealers feel Acura is slow to market with electrification?

I've heard both sides. Some dealers say they're too slow, and some dealers say they're going too fast. I personally think the timing is good. A partnership with General Motors is needed because we, like every luxury manufacturer, are losing market share to Tesla, and that's significant for all manufacturers right now.

Honda Motor Co. is developing ways to customize the vehicle ownership experience via over-the-air updates and other enhancements that can be added after initial purchase of the vehicle. What is Acura's position on subscription services or capabilities that can be enabled after initial purchase?

We're in early discussions about that. We're adopting NADA's franchise framework, which has the dealership participating in those subscription services. In most cases, we'll be the ones selling it and we'll be the ones servicing the vehicle with those upgrades.

Acura is developing an online shopping experience for its customers that still involves dealer touch points. How are dealers responding to this concept?

I am part of the innovation committee so I do know what they're thinking and the direction it's going.

I agree with Acura that we need to meet the customers where they are, whether they're at home on their couch or in the store. I think all car manufacturers are going in this direction, as far as being more available online and allowing the customer to control the sale a little bit more. Personally, I think it's a needed direction.

After an industrywide decline in leasing volume, what is Acura's plan to promote leasing in 2023? How are the recent leasing patterns affecting Acura dealers?

We've seen a record number of customers buying out their own leases because the buyout is lower than the actual value of the vehicle, especially during the summer and early fall when we didn't really have vehicles to put the customers into. I can see over the next few months leases becoming more attractive with manufacturer incentives as inventories build.

Both Honda and Acura are doing a lot to promote sales of used vehicles, including making 10-year-old vehicles part of the certified pre-owned program. How do the dealers feel about the new Acura Precision Used program, and is it working?

I believe it is. I know there's a lot of excitement about it because there's a lot of older vehicles out there right now because of lack of new cars to sell customers. So I think it's an important program and the dealers are on board with it. And it's certainly a good revenue or profit opportunity for Acura dealers, selling parts and financing for cars that traditionally Acura didn't get involved with as much.

Last year at this time, dealers were eagerly anticipating the launch of the Integra. Has customer response lived up to expectations, and what has it done for the entry level of the Acura lineup? Are dealers excited for the Integra Type S?

It definitely has achieved and exceeded expectations. There's a lot of excitement about the Integra and a lot of floor traffic. The car is a winner overall. The Type S that's coming has created even more excitement. It'll have more power, though it will probably be limited production. But it's like a halo for the Integra brand. Bringing back the Integra name was a good idea. It's Acura heritage so was very important to bring that Integra name back.

Are dealers still asking for a subcompact crossover to slot in below the RDX? Something like the new Honda HR-V that just launched?

Yes, without a doubt. We see that the market has shifted. I think it's 80 percent right now for people buying SUVs and only 20 percent sedans. The Acura lineup is two sedans and two SUVs so we need a better balance there. Definitely the dealer advisory board and all dealers are asking Acura for a small SUV in the very near future.

Is there anything else that's missing?

Between now and 2030 we're going to get other electric vehicles using Acura's solid-state battery technology that they're developing. So we will have a lot more products. At a point in the late 2020s, we'll have a whole lineup, like we have now, of internal combustion engine vehicles and also be bringing in battery-electric vehicles. The next two years, toward the end of the decade, we're going to have a lot of different products to sell because of this transition period.