TORRANCE, CA — Honda Motor Co. Ltd. is on a record-setting roll in the U.S. that shows no sign of ending.

“Our goal this year is sales of 1.23 million, divided 1.06 million for Honda and 175,000 for Acura, both all-time records,” says Tom Elliott, executive vice president of American Honda Motor Co. Inc., in an exclusive Ward's interview.

This will follow nine all-time annual sales records set last year by American Honda and a possible third set in 2003 when sales are expected to climb about 4%.

“For us, the growth opportunities are in light trucks. Ten years ago we didn't sell any,” Elliott says. “This year our light truck sales will be up 30% to 400,000 and next year will be close to 450,000.”

Honda set a new record in launches this year as well, with the introduction of five new models: the Civic Si, Civic Hybrid, Pilot, Accord and Element.

The company's sales mix still favors passenger cars two to one over trucks, compared with the overall U.S. market, which is divided roughly 50-50. Elliott sees Honda's truck share rising to 40% in a few years.

Asked whether Honda will match moves by Toyota Motor Corp. and Nissan Motor Co. Ltd. into fullsize pickups, Elliott cautions that such a move would require a new manufacturing operation, plus a huge financial commitment for a product basically salable only in the U.S. and Canada.

“It's not in any near-term plans, but at some point in the future it has to be looked at,” he says.

Elliott insists the passenger-car side will not be ignored, citing the all-new Element cross/utility vehicle on sale this month and a new Acura due early next year. And he expects the U.S. shift upmarket to more luxurious, more expensive vehicles definitely will continue.

“We used to look at the $20,000 to $30,000 segment as the luxury and near-luxury market,” he says. “Now about 80% of sales are in the $25,000 to $45,000 price range.”

Elliott identifies Honda's most formidable competitor as Toyota, “without question,” explaining that all Honda models are cross-shopped with competing Toyota offerings. “We are winning in most of the models where we go head-to-head.”

From 1992 to 2001, Honda vehicle sales in the U.S. rose 57% to 1.2 million units; Toyota managed a 65% increase to 1.74 million. The two auto makers now are squaring off in a battle for younger buyers.

“You like to get them young and keep them in the family,” Elliott says. “This has been a Honda strength since the early 1970s, and we've kept the Baby Boomers for a long time.”

The Element, built on the Civic platform, was designed to attract young buyers, and the company is forecasting initial sales of 60,000 to 70,000 units annually Toyota is taking dead aim at the same youth market with its new Scion division formed last spring. Expect a bumper-to-bumper battle next June with the launch of the first two Scion models.

The rivalry with Toyota extends to alternative-fuel vehicles, an area dominated by Japan's top two auto makers.

“Gas-electric hybrids are important as a transition to whatever comes next, which is expected to be the fuel cell,” he says. “And we are now selling about 2,000 Civic and 700 to 800 Insight hybrids per month.”

“We'll probably introduce additional hybrids in the future,” he says. They could include a performance hybrid such as the Acura DNX concept, with a 300-hp V-6, or a 4-wheel-drive hybrid.

Before year's end, Honda will introduce at least one fuel cell-powered car to the city of Los Angeles and lease about 30 in the U.S. and Japan in the next three years, all for testing. Likewise, Toyota plans to introduce 20 fuel cell cars in the U.S. and Japan late this year.

The rash of extravagant sales incentives, including 0% financing introduced to stimulate sales in the U.S. after the 2001 terrorist attacks, has been a burden for some auto makers and a boon for others, including Honda.

“Incentives bring people into the market, and (once there) they cross-shop and we have a chance at them,” Elliott says. “If buyers are there, in most cases we can sell them a Honda product without incentives.”

Honda has offered some incentives and, although declining to reveal their dollar value, Elliott says their cost in 2002 was lower than 2001 and probably will be lower still in 2003. He doubts the industry will begin moving away from incentives until next spring.

Honda is increasing annual production capacity, currently at 1.1 million units, at assembly plants in East Liberty, OH; Alliston, Ont., Canada; and Lincoln, AL.

By late 2004, a $466 million expansion plan now underway will raise capacity to 1.4 million units and boost Honda's total investment in North America above $7 billion.

“We design, engineer, produce and price vehicles here, make money here and reinvest it here,” Elliott says. “More than 80% of the vehicles we sell are produced here with local content in excess of 90%. We're going to need more capacity, not within a year or two, but over the next five years, and this is being looked at now.”

As Honda's North American output has increased, imports have declined, sinking to 18.5% of sales in 2001, and are expected to stabilize in the 20% range.

Exports, which began in 1987 with shipments of Accord wagons to Japan, so far have totaled nearly 700,000 units sent to more than 90 markets, but have tapered off as Honda builds assembly plants in more countries.

Elliott makes no bones about the importance of North America. “Our sales have exceeded Japanese sales for 18 years,” he says. “It is the No.1 market for Honda and gets the lion's share of attention for product direction and investment decisions.”

And, according to industry analysts in Tokyo, North America provides roughly 75% of Honda's total profits.

Elliott has been pleasantly surprised this year by the strength of the U.S. market and projects sales of 17 million “plus or minus a little bit.” He says next year's sales could be better than 2002 but will depend mainly on whether the Big Three continue to push incentives.

“I'm not sure when, but we're going to reach 19 million or 20 million sales per year, probably within the next 10 years,” says Elliott.

Honda, which now has 7% of the U.S. market, wants more and is helped along with a new sales instrument, the Internet, which matches customers with dealers.

The average U.S. Honda dealer who sells 90 cars a month, now gets about 30 leads per month from the Internet and closes one-third of them. Elliott says a third of the business of some Honda dealers is coming via the Internet.