The move will involve some changes to the business relationship between Honda’s independent sales agents and these changes are the subject of discussions with retailers to be implemented by May 1 this year.
As part of the changes, the company has announced three levels of representation as it seeks to create more of an experience focus in its showrooms and moves to build a strong eCommerce presence to project its cars to a new generation of tech-savvy buyers.
Honda NZ, which has a unique “price promise” of no negotiation and no discounting, enjoys a remarkable 80 per cent loyalty from its owners. But the company has recognised that there is a need to recruit a new generation of buyers, many of whom have moved online – a trend that has accelerated during COVID-19 lockdowns in NZ.
The company is also conscious of the fact that while it has the main cities in NZ covered, it does not have all of NZ covered. The new arrangement is designed to encourage agents to expand service and sales coverage into those areas.
The high level of customer loyalty was built on the back of a move to a sales agency model 20 years ago, where dealers became agents and sold cars owned by Honda from the agents’ showrooms.
Under the system, Honda NZ was able to adopt a no-negotiation approach and instituted a “price promise” under which a model would be sold at one price across NZ with a promise that the price for that model would not be discounted for the life of the model. This included fleets.
Over time, the price promise saw Honda generate the best resale values for its cars in NZ and it was able to show that the total cost of ownership was better than for brands that negotiated prices in dealerships and discounted cars to move stock and attract fleets.
In order to sell at fixed prices, dealers were made into agents because they were selling on behalf of Honda as owner of the cars.
A company statement said that under the latest arrangements, Honda retailing will transition into three new store types:
Honda Stores (think Apple Stores): where customers can experience and purchase Honda vehicles. The sale of the new Honda will be directly with Honda New Zealand. Honda Stores will offer customers full servicing, Honda genuine parts and accessories.
Honda-owned branches would be expected to move to fully-fledged Honda Stores and current independent agents will be able to upgrade their operations into Honda Stores as well.
A concept model has just been opened at the company’s vehicle logistics operation in Nelson.
Honda Service Stores: for servicing Honda vehicles, Honda genuine parts and accessories.
These stores will also have a number of popular Honda demonstrator vehicles available and accommodate an appointed Honda New Zealand Brand Ambassador, authorised to sell Honda vehicles. These may well be a division of a Honda Store seeking to cover service and a sales presence via the ambassador in another service location within their territory.
Authorised Service Stores: for servicing Honda vehicles using only genuine Honda parts and accessories.
Peter Ashley, general manager of sales at Honda NZ told GoAutoNews Premium: “The agency system has been instrumental in us getting that 80 per cent loyalty rate with our customers. We definitely could not have achieved that without the agency system and the agents in the regional operations.
“So the Honda Store will be either a branch, which we own ourselves, or it will be an independent agent. We need coverage around NZ. We have the centres pretty much covered but we don’t have all of NZ covered. The key to that is the relationship we have had for many years with the agents which we don’t want to disrupt. So the one-team philosophy that we’ve been operating is going to remain.”
Mr Ashley said that Honda NZ was talking with agents about their potential to become Honda Stores or extend their reach within their areas with service operation and ambassadors.
“It could well be that a current operation that is just an authorised service store, which really just looks after a customer in a remote area, might want to step up to a service store. A service store, or a current service store or an authorised agent might even want to step up to be a Honda Store.”
“So potentially, someone who is currently operating as an agency under our arrangement may choose to expand so that we get the coverage we need in the unallocated areas in NZ to put up a service store as well and send referrals back to the agency.”
Honda owns seven branches (dealerships) in NZ. The seventh was recently acquired from an agent that was under pressure from the COVID shutdown. It has 17 independent agents.
The extent of Honda factory ownership in NZ goes back more than two decades when Honda closed its assembly plant in the shaky isles, where it was enjoying a market share of between nine and 10 per cent.
Market share went as low as two per cent and existing dealers were facing such a huge reduction in volume as the country moved away from local manufacturing and used car imports were booming, that Honda moved in to buy many dealerships just to keep representation in key market areas.
When the agency model started in 2001, Honda owned 13 stores and there were 20 independent dealers appointed as agents with a market share of about four per cent.
Over time Honda market share in NZ rose to eight per cent and in Christchurch it went as high as 12 per cent.
Currently, Honda sits at 4 per cent post COVID-19 during the 2020 calendar year.
By John Mellor