Honda downsizing a “kick in the guts” for dealers
Honda has announced reforms to its business model in Australia which will downsize operations, and the AADA says the timing couldn’t be worse.
HONDA AUSTRALIA has confirmed that it will streamline its showroom lineup and consolidate operations in Australia in a bid to find improved operating efficiencies as an expected drastic drop in annual sales looms.
Honda will axe the small Jazz hatchback and City sedan, focusing on SUVs, the Civic and Accord passenger cars, and the trimming the Odyssey people mover to a flagship model grade.
Australian operations will also downsize, Honda saying it will “shift to a new agency-style business model,” meaning the closure and retransformation of dealerships across Australia.
Last year, Honda sold almost 40,000 vehicles across 106 dealership sites nationwide. It is expected that many sites will move to other brands and that key Honda dealerships will become display rooms and handover locations with service operations out back.
However, annual sales volume for the Japanese brand is expected to be hit by as much as 50 per cent under its new plan, which will go into effect from July 2021. Pricing will be uniform across the nation with a no-haggle fixed price on all vehicles sold, lowering the need for some sales and operations staff in Australia.
“Customer preferences are changing and other industries have evolved while the automotive industry still uses a model that is decades old,” says Honda Australia managing director, Stephen Collins.
“We can’t sit still. The Australian market has seen 23 consecutive months of decline and every automotive business is rapidly changing,” he adds, highlighting how ever slowing sales in Australia are hitting brands, most recently Aussie icon Holden which has been shut down by owner General Motors.
The Australian Automotive Dealer Association has come out to bat for dealers after the announcement, suggesting that it believes the news is a “kick in the guts for many of Australia’s 106 dealer outlets currently selling and servicing Honda cars across Australia.”
AADA CEO James Voortman says that the timing could not be worse, with all dealers in Australia already struggling to figure how to operate with the latest COVID-19 virus lockdown.
“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,” says Voortman.
Voortman goes on to suggest that Honda should be more transparent with what the total losses to jobs and dealers will be in Australia in 15 months’ time.
“Honda has not said how many Dealers they have 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.
“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. Dealers who have committed so much to the brand should not be forced to fight for adequate compensation.
“This is just 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 200 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.
Collins says that the move is unavoidable and that it is the best solution for keeping Honda in business in Australia.
“Customer preferences are changing and other industries have evolved while the automotive industry still uses a model that is decades old,” he says.
“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.”