The company said that it is no longer a volume-driven franchise.

The restructure, which does not affect the Australian operation, is expected to be completed by 2022 in a bid to deliver sustainable profitability for Honda dealers.

The changes indicate that Honda Motor Company may be looking at moving away from the current dealer-factory arrangements used universally that are fraying at the edges and potentially leaving OEMs exposed to weakened retail networks as dealers face unprecedented challenges to their traditional trading activities.

The move to remake the dealership business model for Honda UK retailers also has similar overtones to those changes made by its antipodean equivalent, Honda New Zealand.

Honda NZ moved to one-price selling (a no-discount policy) and restructured its dealers as agents after its local assembly plant closed more than two decades ago.

Honda UK head of network development Rebecca Stead told AM Online that the network will be reduced to between 100 and 125 outlets with a minimum of 200 annual retail sales per dealer and an average return on sales of two per cent.

The dealer sites retained will have a 40-minute point-to-point drive time based on research which found that more than 80 per cent of customers bought their car from a dealer within a 35-40 minute drive time from their home. Aftersales drive time was 32 minutes depending on workplace location or shopping habits.

Honda UK plant

The company now has 155 sites. It had 174 in 2014.

It will be the second dealer reduction after Honda UK announced last year it would cut dealers by 10 per cent.

Honda is the latest manufacturer to announce a reduction in UK dealerships.

Vauxhall said in March 2018 that it would reduce its network by about a third, from 324 sites to the current 278 dealerships.

Ford’s UK retail locations have fallen from 460 in 2018 to 446 this year, while PSA Group-owned Peugeot UK reduced its network from 211 sites to 183 from 2017 to 2019.

The Honda UK dealer changes are also in preparation for the closure of its Swindon factory by 2022. This will take the pressure off UK dealers to move UK-built cars (hence the need for fewer dealers and the reduction in targets) and the new emphasis on Honda becoming a non-volume-driven franchise.

AM Online also said that Honda was going to encourage its vehicle dealers to sell Honda motorcycles.

Honda motorcycle dealers currently average a five per cent return on sales. Only four retailers in the UK currently operate both cars and motorcycles.

AM Online said that as part of Honda’s plan to drive profitability, it has reduced retailers’ demonstrator volumes by 50 per cent over two years by introducing a hub-and-spoke test-drive access model.

It is also targeting 70 per cent PCP penetration – from its current 60 per cent – and better use of its customer data to drive prospecting via Honda Finance to boost customer retention.

Honda Australia director Stephen Collins told GoAutoNews Premium that the Honda UK dealer network changes “were clearly linked to the decision to close UK manufacturing”.

“The only impact UK manufacturing has on Australia is Civic Type R production, and we will resource Civic Type R once UK production ceases,” he said.

“Honda currently has 106 dealerships in Australia and this number has been stable for the past few years. We have no plans to increase or decrease the number of dealerships in Australia.”

AM Online reported that Honda UK removed volume targets by presenting the brand’s historic sales data to retailers who were then asked, ‘What volumes do you need to trade to make your business work?’

Its field support team was then charged with helping dealers meet their targets as well as driving customer experience and retention KPIs, with bonus payments paid within 20 per cent of the agreed volumes.

Ms Stead said the 20 per cent buffer would “remove any distress” and reinforce the fact that the brand is no longer pushing for volume.

She said that the new contract terms have in many cases resulted in stock being pulled by dealers rather than being pushed from the manufacturer into dealerships.

“The network needs the volume as much as we do,” Ms Stead said.

“Our margins aren’t high – that’s not our business model. Dealer profitability is not a function of manufacturer new-car bonus payments but a function of the whole business – new, used and aftersales. A dealer’s profitability is within their control, not the manufacturer.”

By Neil Dowling