The Quest for an Effective Automobile Sales System Getting into the Market Last - Being First with the Best
The Ministry of International Trade and Industry (MITI) in May 1961 unveiled its basic administrative policy regarding the automotive industry (later called the Specified Industry Promotion Bill). Upon its passing, the bill would make it impossible for any new car company to enter the market. Given the assumed timeline, Honda had to begin automobile production and sales immediately in order to obtain sufficient sales records before the bill's passage.
The front view of AHSF's facility in Nagaoka, circa 1968 (Photograph courtesy of Toshinobu Kudo)
Honda's first automobiles, the T360 mini truck and S360/S500 sportscars, debuted in October 1962, at the 9th Japan National Auto Show. Although the cars were well received by the public, the whole affair was a matter of concern to Senior Managing Director Takeo Fujisawa, who felt the company had been rushed into producing cars at least a few years earlier than originally planned. There was still a great amount of work to be done.
Kihachiro Kawashima (then executive vice-president) looked back on the situation in the November 1978 issue of the Honda Company Newsletter (Vol. 151):
Honda was a total stranger to the automotive market at that time. We could not implement nationwide promotional campaigns as we had done for the Cub, simply because we had never sold any cars before. Moreover, the establishment of large retail stores such as those of Toyota and Nissan was out of the question, because that would have required a huge investment, causing us to lose our price-competitiveness. Therefore, Fujisawa thought of establishing a sales network among Honda motorcycle retail dealers who had sufficient financial resources and wanted to get into the car business.
However, these dealers also had certain disadvantages. Although they had strong ties with the local communities, their operations were too small to handle automobiles. To compensate for that weakness through our resources as a manufacturer, and to allow the retail dealer to concentrate on selling, we established systems in which service issues were handled by our SF (Service Factory) network, with the trade-in and resale of used cars being handled by Honda Used Car Sales. Assistance with day-to-day sales operations would be provided by our sales offices, while marketing and other support would be provided by Honda Sales Research (HSR). We had to use our motorcycle retail dealers to sell automobiles. The new support system came into being once we had explored ways of converting their potential power into an effective sales force.
Honda established Honda Shinpan Co., Ltd., at about the same time, in order to expedite financial matters.
This series of support systems was collectively known as Honda's "retailer-based sales system."