Business and Finance, Free Access Articles ,

HONDA has confirmed it will adopt an agency model for a drastically reduced dealer network that will work with a smaller, more premium range under a national pricing policy when the new way of doing business begins on July 1, 2021.

As reported exclusively in GoAutoNews Premium earlier this month, the move replicates the program adopted in 2000 by Honda New Zealand and, more recently, by Toyota New Zealand.

In Australia, the comprehensive restructure is believed to affect most dealers, reducing the network to significantly fewer owners. It currently has 105 dealerships operated by 71 owners, which is likely to fall to about 60 outlets held by 12 owners.

A Honda Australia spokesperson told GoAutoNews Premium that the number of dealerships would not “materially change but the number of owners will be reduced”.

“Most changes will occur in metro regions where we will shift to a ‘hub and spoke model’,” the spokesperson said.

“This will allow us to design a Honda network that is suitable to the size of our business yet still allow us to service our existing customers in a convenient manner.”

Dealers contacted by GoAutoNews Premium would not comment.

The changes will also see a reduction in the number of Honda models available, leading to a substantial fall in annual sales volume and market share.

Announcing its plans today with a statement and without making its senior executives available for comment, Honda Australia was short on detail but confirmed the move to reduce dealer numbers will begin now and take 15 months to complete.

It did not confirm dealer numbers, saying only that “the exact number of dealers that will remain under the new model has not been determined”.

In the statement, Honda Australia director Stephen Collins said: “The transition over the next 15 months will be a gradual process to allow our dealer network to fully prepare for the new business model.

“Honda Australia has just celebrated its 50-year anniversary; now is the time to take the necessary steps to seek to ensure the business and network are set up for the future and that our customers are with us for the next 50 years.”

Honda said it had “reaffirmed its commitment to the Australian market and unveiled its plans to transform its local sales and customer service in response to challenging international and domestic trends”.

“Over the next 15 months, Honda will transform its dealer network across Australia to strengthen the business for long-term sustainability in a time of transition across the automotive industry,” the company said.

Mr Collins added: “We can’t sit still. The Australian market has seen 23 consecutive months of decline and every automotive business is rapidly changing.”

GoAutoNews Premium was told at the beginning of the month that Honda Australia would hold two meetings with its dealer partners, the first on March 23 and the second – for dealers who will retain their full franchise – on March 26.

Subsequently, Honda Australia told GoAutoNews Premium that the coronavirus crisis had stymied the planned meetings and talks were being conducted by teleconferencing and that these would run over two days this week.

Like the system in New Zealand with both Honda and Toyota, the Australian program is designed to “deliver transparency of price and consistency of experience, no matter which Honda dealer customers visit”.

The model uses a one-price, no-haggle system that Honda Australia said will benefit customers.

It said the agency model would be simpler and more transparent (on pricing) that would “remove some of the pressures and anxiety sometimes associated with the purchase of a new vehicle”.

It would also allow Honda to “set consistent prices for new vehicles across the country” while allowing customers to “experience the full Honda range and browse for the model that matches their exact preferences without pressure to necessarily buy”.

The “full range” term indicates Honda Australia will ensure all of the new Honda dealers hold the entire range (except the NSX) and foot the floorplan bill.

Stock would be held by warehouses in each hub centre, likely to be through an operator such as Honda’s contracted logistics firm Autocare Services.

“Customer preferences are changing and other industries have evolved while the automotive industry still uses a model that is decades old,” Mr Collins said.

“We have excellent customer retention and want to reward our loyal and highly valued customer base with a more relational and less transactional experience.

“We know our customers want good value, strong resale value and a seamless ownership experience on top of reliable engineering and quality vehicles.”

The background leading up to this is one that the Australian automotive industry has repeatedly signalled over the past two years and which Honda this week echoed as the driving force behind such a massive overhaul of its business.

The company said: “The automotive industry in Australia is one of the most competitive in the world with more than 60 car brands competing for approximately one million new car customers each year.

“The industry has experienced challenging conditions in recent times evidenced by 23 consecutive months of declining sales in new cars.

“As a 100 per cent import market, the Australian industry is vulnerable to currency exchange fluctuations and the Australian dollar is currently very weak.

“The industry is facing increased regulation and lack of certainty on CO2 targets and preparing for further disruption with advancements in technology and electrification.”

Honda said it had conducted an “extensive business review to understand how to make the business stronger and more enjoyable for customers in the long-term”.

The company said the underlying aim of the new business model was to “deliver certainty of price and a consistent, enjoyable customer experience no matter which Honda dealer customers visit”.

A rationalisation of the model range will take place over the next 12 months.

The new-generation Jazz will not be coming, meaning the light hatch will be retired, the City light sedan will be deleted and most emphasis will be placed on three core models: the CR-V mid-size SUV, HR-V small SUV and Civic small passenger car.

Supporting roles will be played by the Odyssey people-mover, Accord mid-sizer and Civic Type R hot hatch.

The focus will be on premium variants and Honda’s annual sales are expected to plummet to just 1650 cars per month – or 19,800 a year.

Last year, Honda sold 43,868 vehicles, down 14.9 per cent on 2018.

By Neil Dowling and Terry Martin

Dealer Auction