HONDA Australia’s plan to reduce dealership numbers and adopt an agency-style business model is a “kick in the guts” for Honda retailers, their employees and their customers, says the peak dealer body.

The Australian Automotive Dealer Association (AADA) said it was a “sad day” for many of Australia’s franchised new-car dealers with the news that Honda will be significantly cutting its dealer network.

AADA CEO James Voortman said: “This is a kick in the guts for many of Australia’s 106 dealer outlets currently selling and servicing Honda cars across Australia.

“I am stunned by the timing of this announcement, as it simply lacks compassion. So many dealerships are struggling with the immediate effects of COVID-19 and now these Honda dealers and their employees have been told that they will be closing down.”

Mr Voortman said Honda Australia has not signalled how many dealers will be terminated “but our understanding is that it is a significant portion of the network”.

“Honda should come clean and specify how many dealers they will be terminating,” he said.

“It is so important that Honda compensates these dealers sufficiently for the significant investments they have made in the brand, be it capital, time or effort.”

Echoing current issues with General Motors and its Holden franchisees, Mr Voortman added: “Dealers who have committed so much to the brand should not be forced to fight for adequate compensation.”

He said it was the latest example of the vulnerable position in which franchised new-car dealers can find themselves and it comes weeks after General Motors announced the dumping of some 185 Australian Holden dealers.

“In the last six months we have had Honda, Holden and Infiniti either pull up stumps from Australia or significantly cut back their networks, leaving a trail of destruction in their wake,” he said.

“It underscores the urgent need for strong automotive franchising laws in Australia – laws that will set a minimum standard of conduct for offshore manufacturers operating in Australia.”

The Honda announcement comes a week after the federal government announced measures to stimulate the Australian economy, including the instant asset write-off program that benefits the automotive industry during its two-year run of negative growth.

Mr Voortman said the downturn in the vehicle retail industry “cannot be under emphasised” and the AADA would ask the government to extend the instant asset write-off beyond June 30 while considering additional measures to encourage consumers to buy new cars.

“Similarly, while we welcome the announcement of a time-limited 15-month investment incentive, the downturn in our industry means investment programs will likely remain subdued,” he said.

“We urge all state governments to follow the lead of the federal government and adopt stimulatory measures.

“Stamp duty exemptions on the sale of new cars would facilitate renewal of the fleet, leading to safer, cleaner and more efficient vehicles.

“Dealers have high turnovers due to the high value of their products, but profit margins are incredibly slim at less than one per cent.

“Due to these higher turnovers, dealers have missed out on some benefits announced for smaller businesses. We would urge the government to consider our unique circumstances.”

By Neil Dowling