Innovative Infamy: The story behind that 10-seat Honda CR-V
Honda CR-V AUV: The most interesting vehicle for the Philippines since the jeepney?
The story of the second-generation Honda CR-V is perhaps one of the most famous (or infamous) in Philippine automotive history.
In 2002, Honda Cars Philippines delivered a shock to the industry with the CR-V. But there was something different about it, as Honda launched a CR-V that had evil genius written all over it.
What we're referring to is the AUV version of the Honda CR-V.
Those old enough *ahem* would recall that Honda once offered the second-generation CR-V in a configuration that allowed it to meet (albeit questionably to some) the definition of an Asian Utility Vehicle or AUV. The technical and legal term at the time was Category 1 of the Commercial Vehicle Development Program, which is basically the class of the AUV that included (at the time) the Toyota Revo, the Isuzu Hi-Lander, the Mitsubishi Adventure, and more.
What Honda did was re-configure the CR-V to have seating for 10 people. Yes, they somehow managed to double the typical occupancy of a CR-V, earning it the nickname from its detractors: "10-cheater".
Honda was able to achieve this by making some clever changes to the interior. Most variants of the second-gen CR-V (RD4) had two captain's seats in front with the armrests; those were tossed out. In the place of those seats, Honda installed a standard reclining driver's seat, along with a bench-style seat to make the middle (where a folding tray would normally be) a seat as well. Honda was able to do this because the shifter of the CR-V was on the dashboard, not the floor. The normal 3-point seatbelts remained for the driver and front (right) passenger. The middle passenger had a lap belt.
The middle row was another piece of clever work. Taking their cue from for-hire AUVs (the original FX taxis) which had 4 passengers in the middle row, Honda came up with a similar solution: they had a 4-seater middle row. They divided up the middle row bench seat to allocate space for 4 passengers as per the regulations at the time. Each middle row passenger had seatbelts: 3-point ELR for the ones sitting beside the doors, while the middle passengers had lap belts.
RD4 CR-V Brochure cover
The third row was simple but clever. Instead of the folding table that would have served as a convenience for camping or picnics, Honda came up with a three-seater third-row bench. No fancy mechanisms; just a simple bench seat that can fold and tumble forward if unoccupied. If memory serves, the third-row passengers did not have seatbelts.
So if you tally all that up: 3 in front, 4 in the middle, and 3 in the back. Three plus four plus three is ten. Today's Innova only seats 8.
RD4 CR-V Brochure showing 8-seater configuration. We couldn't find a digital copy of the 10-seater model.
Some would ask why would Honda engineer a CR-V to have 10 seats, and the answer is simple: they tailored a model to take maximum advantage of the tax regulations just like the other AUVs. The key here is the issue of definition. Under Bureau of Internal Revenue (BIR) Revenue Regulations 14-99, one of the important definitions of an “automobile” is a vehicle that has seats for less than 10 passengers. If a vehicle has 10 passengers, it is not classified as an automobile. Any vehicle with 10 or more seats is considered to be a mass transport van and is therefore exempt from excise while an “automobile” was not exempted. Go figure.
The spirit of the rules was simple: a 10-seater or an AUV is basically the people's car in the Philippines. Many brands tried with various small passenger sedans and hatchbacks, but it was really the AUV -the more rugged precursor to MPVs- that made more sense. But there were rules about seating, and that's what Honda wanted to meet.
The regulations said that each passenger must have 60 cm of seat length available, and Honda met that. The challenge will be width; the driver has to have at least 50 cm of space, while every other passenger should have at least 35cm of seat width. Honda met all of that, even though the front center passenger seat looked a bit iffy. The middle row was critical: Honda divided up the 140 cm total width by 4, and that qualified -only just- for the 35 cm rule. This was absolutely clever and had to be executed with no margin for error.
But Honda wasn't done yet; the seating configuration doesn't mean that the CR-V automatically qualifies for AUV status. There was another requirement for the AUV classification, and that was local production and significant local content under Memorandum Order 346 (e.g. body panels, engine, transmission). Yes, that CR-V was made here in the Philippines from CKD parts at the factory in Santa Rosa, Laguna and the switch to the 10-seater format also gave a boost to the local content. Honda said the CR-V AUV had about 63.1% local content, whereas the previous CR-V (LCV) only had 47.31%.
The production of the second-generation CR-V also came with a huge investment to local manufacturing to further increase the local content, and so Honda decided to have locally-made transmissions for the model: the 5-speed manual and the 4-speed automatic. That meant a transmission plant with an investment of PHP 1 billion and yield PHP 5.3 billion per year in exports to other markets.
The result was a type approval from the Department of Trade and Industry (DTI) on January 7, 2002. This was further affirmed with a certificate from the Board of Investments (BOI) and confirmed by the BIR. That meant the CR-V 10-seater became a participant in the government's Commercial Vehicle Development Program (CVDP) and was entitled to all kinds of financial benefits that Honda can enjoy. They had won.
There were two variants: the base model was the CR-V 2.0L 5-speed M/T, while the other variant was the CR-V 2.0L 4-speed AT. Both models had the K20A4 with 158 horsepower and were front-wheel drive only. If I remember correctly after riding in one back in 2002, the plastics were not as good, the seats were fabric (mostly), bumpers were unpainted, there weren't as many features, so on and so forth.
When it was launched in the market in 2002, Honda sold the base 5-MT model for an SRP of PHP 899,000 while the automatic variant was PHP 959,000. If those vehicles did not qualify as AUVs, the price would have been PHP 1.1 million and PHP 1.2 million, respectively.
The result was what they expected: Honda's sales for the CR-V from 2002 to 2003 skyrocketed. The company only usually sold about 1,800 units of CR-V per year prior to the “CR-AUV”, but in 2002 they sold 7,125 units of the 4x2 MT. In 2003, Honda sold 9,664 units of the CR-V, and just only over 100 were of the non-AUV 4x4 automatic; the rest were the AUV model.
The fact that it was qualified as an AUV didn't matter too much to consumers. Honda's bold move really clicked with the customer base resulting in long queues that manufacturing could barely keep up with. Customers really liked that they can buy what is effectively a modern crossover SUV for a good price because it qualified as an AUV. Many customers actually took their fresh-from-the-showroom CR-V models to places like Caloocan or Banawe to have a captain's seat retrofitted in front.
The idea and execution of the Honda CR-V 10-seater is not one that just popped up overnight. According to our sources, the 10-seater project actually started in 1998 when Honda set up a team to look into the idea of building a model that can get them the volume they need. Here's the thing though: the CR-V wasn't the model that they were initially looking at.
It was the Odyssey.
What Honda's product team wanted to explore was the idea of retrofitting the yet-to-be-launched Honda Odyssey as a 10-seater. That is not something widely known. They examined the Odyssey (Japanese style variant, not the North American type) if it could manage it. The vehicle already had a three-row configuration, but retrofitting wasn't that easy. Our sources say that the Honda “skunkworks” team came up with all kinds of wild and crazy ideas for the Odyssey. There were no more examples given, but we can imagine things like L300-style peripheral seating to get it to qualify.
The product team at Honda Cars Philippines went so far as to retrofit an Odyssey with a mocked-up 10-seater interior. But before the vehicle could move forward, we were told that Honda's R&D quashed the idea. Honda R&D in Japan didn't take too kindly to the conversion and put a firm yamete kore to the 10-seat Odyssey project for the Philippines.
The Odyssey that had the 10-seat interior never had its moment in showrooms; the original interior was re-installed and the vehicle was sold off. But they had no objections to the CR-V; if there were, Honda Cars Philippines was able to push past it.
The greatest resistance to the 10-seat CR-V, however, came from competitors. A lot of players in the industry didn't take too kindly to Honda's creativity, implying that it goes against the spirit of the AUV program. It probably also didn't help that as it took sales from several key models in the market. There was even a powerful campaign back in the day to question the legality of the Honda CR-V that met the type approval for a 10-seater and Category 1 AUV.
But here's the thing: Honda wasn't the only one that was using certain loopholes to extract advantage. A lot of car companies in the Philippines did. For instance, there was a certain tax on vehicles that had a 4WD or 4x4 drivetrain, so companies like Ford removed the rear differential from the Escape. That's why you can see Escape (and Mazda Tribute) models with an empty diff housing/cage in the back. Some brands also toyed with the 10-seater mass transporter by fitting all kinds of seats (e.g. jump seats) to existing imported SUVs to get around those excise tax rules. Some big vehicles that already had wider seats were configured as 10-seaters like the Ford Expedition and Chevrolet Suburban.
So the government ended up doing what parents would do if their kids were fighting at a birthday party: they ended the party. No more fancy rules of the number of seats, engine displacement, drivetrain type, so on and so forth that can be exploited creatively. They just went ad valorem on excise tax. Every vehicle sold to the public now had excise tax... even the AUVs.
No one was exempt, and vehicle prices rose. That put a crimp on the sales of all the AUVs because the prices shot up, including the CR-V. In 2004, sales of the CR-V 10-seater dropped from the previous year's 9,532 units to just 2,342 units. In 2005, that dropped further to 1,887 units. In its 4-year production run, Honda sold 12,310 units of the CR-V 2.0L manual, with another 8,576 units of the automatic. That's a total of 20,886 units over a 4 year period.
The next generation of the CR-V which was launched in 2006 would no longer be manufactured in the Philippines. They just imported. It just didn't make sense if they couldn't offer a model at the lower prices consumers wanted. Production at the factory declined steadily over the next decade and a half. In 2020, the factory shut down for good. No more locally made Honda automobiles from now on.
Some may think it's karma for Honda, that it serves them right for trying to take advantage of the interpretation of the rules, but in reality every competitive company wants to leverage anything to give their products an edge. That's normal in competition, and Honda wasn't the first to try and exploit it.
That CR-V doesn't deserve the moniker “10-cheater” because they didn't really cheat; they just studied and did their homework. Nowhere in the rules did it say that the base vehicle couldn't be a crossover SUV, and you wouldn't get the approval of three different agencies (DTI, BIR, BOI) if your model wasn't meeting the requirements. Surely one of those three-letter offices would have raised the red flag.
My point is this: instead of competitors rising to the challenge and innovating by configuring foreign models to suit local tastes and maximize local laws, they sought to question something innovative.
While that kind of thinking isn't unique to us, it is certainly a part our culture. And it could have some long term effects. Think about it: the issue surrounding the CR-V accelerated the talks of excise tax at the time. When they approved it, the prices of all AUVs went up. Manufacturing here didn't become any more viable for auto brands either because volume dropped. And I would even argue that the long-term effect of the demise of the CR-AUV is the eventual closure of the plant 15 years later; an event that largely triggered those safeguard duties that the industry is crying foul about now.
The Philippine auto industry is a divided one, but it shouldn't be. The politics and backroom talks may shock those not privy to it. Kanya-kanya. If there was a united front, then things like safeguards and excise taxes can be lobbied against more effectively. Local automobile manufacturing and parts manufacturing may even grow if there was cooperation. We may even see laws that make sense for the future like electric vehicles and hybrids, or better rules concerning road safety.
If the industry wants to win against taxation and safeguards, they need to be united. For Filipino consumers to have more affordable personal transportation, they have to lobby as one industry.
We can learn a lot from the story around that CR-V and what happened in the general industry. Sure, the story of the CR-V dubbed as the “10-cheater” may be interpreted as unethical or borderline dastardly, but to be perfectly honest I find it to be absolutely brilliant. This was their "Kobayashi Maru".
In the same way that F1 teams come up with clever solutions to one-up their competitors, the people at Honda Cars Philippines thought outside the box to come up with something new for the box. You just don't see this kind of Filipino-driven initiative in the local auto industry anymore.
Look around the vehicles made in the Philippines, and honestly, those are just facsimiles of what you see elsewhere, sometimes with even lesser specs. More importantly, there's no originality nor is there a unique story. In my opinion, the 10-seat CR-V is a true story of Filipino ingenuity, and it should be right up there with the story of the jeepney and how it was built by Filipinos for Filipinos out of surplus quarter-ton GPs.
That's why whenever I see a three-row second-generation CR-V on the road, I can't help but smile a little bit.
