HONDA Australia is poised to reduce the size of its national dealer network and adopt an agency sales model borrowed from New Zealand.

The company has called dealer meetings to outline the radical plan. These are set to be held within two weeks.

GoAutoNews Premium has been told that the first meeting on March 23 is expected to reveal a smaller franchise network, a centralised distribution program and even a possible move by Honda Australia to itself operate some showrooms.

It will also change the relationship between the franchisee and the OEM with an agency model under which Honda owns the demonstrator cars and showroom stock supplied to dealers, removing floorplan costs from the dealership debit column.

Honda New Zealand first introduced the agency model in 2000.

Under the system dealers received commissions for selling the cars on behalf of Honda. The base commission was four per cent rising to seven per cent if the dealers met various KPIs and targets.

Parts are also owned by Honda which paid dealers a delivery fee for trade sales.

The system included centralised sales and service booking for all dealers and a Honda dealer management system provided at no cost by Honda. It provided national access for all dealers to details and sales and service histories of all NZ customers.

A key element of the NZ program was the Honda Price Promise in which cars were priced at what had proven to be the actual transaction price rather than RRP and therefore priced below the competition for an equivalent car.

The price was guaranteed to stay the same for the life of the model with only accessories being added along the way to keep interest from buyers.

The Price Promise was promoted as a program that would maintain equity, transparency, consistency and value for Kiwis buying new Hondas.

Customers report favourably about the fixed-price and haggle-free car buying process and because the price is the same across NZ, it has proven to keep resale value high. Honda NZ reports customer retention at above 80 per cent.

But it may come at a cost. Sources indicate that in Sydney alone, the number of Honda dealers will be reduced from 12 to three.

GoAutoNews Premium learnt from one retail source that the March 23 meeting with dealers will announce the end of some of them as Honda franchisees.

The dealer source also said that a second meeting will be held on March 26 between Honda Australia and those dealerships selected to continue as franchisees.

Honda dealers approached by GoAutoNews Premium said they were unaware of the radical change to their business.

One said a recent change in the management of a Honda dealership meant the incoming dealer principal was required to take equity, and said there would be concern that if this dealership was axed it would represent a considerable personal loss by the new manager.

The agency model is said to follow that of Honda New Zealand’s ‘Price Promise’ which in 2000 moved to an agency to maximise dealer profits and ensure a single price of its cars across the country.

Subsequently, Toyota NZ in 2018 adopted a copycat program with its dealers. At the time, Honda NZ managing director Nobuya Sonoda said: “Price Promise has been very successful for Honda in New Zealand, and we are delighted that Toyota New Zealand is adopting a similar approach.”

Now it seems the nation of Australia is ready for a similar change.

For now, Honda Australia is not discussing the issue. Asked about possible changes, Honda Australia issued a statement and said further details would be covered in a media roundtable at the end of this month that would discuss future plans.

In its statement, the company said: “Honda is committed to the Australian market and, as a part of normal business, regularly assesses its operations and organisational performance.

“We committed to our dealer network that we would update them on our long-term plans in the first quarter of 2020 and we are planning to do this later this month.”

Globally, Honda has adopted changes in its dealer network over the past 12 months.

India is restructuring its Honda network with changes expected from April 1, though most of these are centred on reducing production and offering voluntary retirement as Indian car sales slump.

In the UK, Honda is working towards closing its South Marston plant in the English county of Wiltshire after announcing the move on February 19 last year.

It will spell the end for 3500 direct jobs plus an estimated 12,000 in supplier businesses. The plant makes Civic models, including some destined for sale in Australia.

By Neil Dowling