A Luxury Compact? Yes, for Canada Only

It's an Acura. No, it's a Civic. Well, it is a Honda anyway.

Honda Canada Inc. is building a new car that will be sold only in Canada. The car will carry Honda's luxury name, Acura, but it is basically a souped up Civic, the carmaker's compact model.

The compact car will be produced in Alliston, Ont., about 60 miles north of Toronto. The assembly plant turns out about 120,000 cars a year. Now 7,000 of those will be the new Acura 1.6EL, with the 1.6 referring to the size of the four-cylinder engine that powers both the Civic and the Acura.

The Acura version of the Civic is, as they say in the car business, loaded.

It has air conditioning, power everything, and the performance version of the Civic engine, producing 127 horsepower. "The differences between the two cars are in front and rear panels - and in front suspension, which gives a firmer ride," says James Miller, senior vice president of sales and marketing at Honda Canada, Toronto.

Currently, 80 percent of the Civics made at Alliston are exported to the United States, tariff-free, under the terms of the North American Free Trade Agreement. But the new Acura model is staying put. American Honda dealers were not interested in the new car.

How US market differs

"There's a substantial difference between the Canadian and American market when it comes to compact cars," Mr. Miller says. "The market for compact cars in Canada is 42 percent of the total," while compacts only make up about 27 percent of the car market in the US.

The big reason for the Canadian interest in compact cars, market research finds, is high income taxes that leave Canadians with less disposable income than their neighbors to the south. Gasoline prices in Canada are 50 percent higher than in the US, so more fuel-efficient cars also have more appeal.

Niche market

Auto analysts say the car will fill a small slot in the market.

"There appears to be a sufficient difference between the Civic and the Acura to justify a small price differential," says Toronto auto writer Jim Kenzie. He refers to the new Acura as "a cheap luxury car."

The car is being shipped to dealers in early October. It will be priced between $17,800 and $22,000 (Canadian; US$13,000 to $16,150), compared with $15,395 to $18,395 for the Civic. One advantage for the company is that the car is made in Canada, avoiding the stiff Canadian duty on non-North American cars.

Why is the car being sold only in Canada? Because the goal of the giant Japanese carmaker is to get a bigger share of the compact-car market here.

"There is a lot of commonality with the Civic and that helps," Miller says, explaining how Honda can turn out just 7,000 of one model and still make money. "Not only do we expand the market for compact cars, but we avoid the US dollar-yen fluctuation that can affect prices and profits."