Honda Set to Move to Fixed Pricing

After much speculation, Honda has finally confirmed its plans for the Australian market for the foreseeable future. While some industry experts predicted that the Japanese brand might wind up its local operations, just as Holden has recently done, the company has instead ‘committed’ to retaining its presence down under.

However, the auto-maker’s commitment comes with a few strings attached. And for motorists out there, not to mention Honda dealers, it means that there will be significant changes on the horizon.

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What changes are Honda making?

Commencing 1 July 2021, Honda will be reducing its number of dealerships across the country and shifting to an agency-style model of operations. Unfortunately, for dealers this is likely to lead to a lot of staff being made redundant, with the total number of dealerships and service centres across the country set to drop as much as 40%.

Those dealerships that survive the cull will transition to a hub and spoke business model. In effect, dealers at showrooms will function as agents on behalf of the company’s head office, with Honda Australia holding all stock nationally. The dealer agents will be paid a fee directly by the brand.

While dealerships would normally purchase vehicles from the parent company and then run their own business operations, this will no longer be the case. Dealerships will be display rooms and pick-up points. This means that buyers will have less ability to haggle on pricing for new cars, with fixed prices set to be introduced across the company’s range.

On this point, Honda will also be downsizing its vehicle line-up. The core models in the company’s range will soon consist of the Civic, HR-V SUV and CR-V SUV. While the brand will still sell the Accord, Civic Type R and Odyssey in smaller volumes, it is doing away with the Jazz and City models.

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How might this impact new car buyers?

As mentioned above, new car buyers are expected to have far less scope to negotiate on pricing in the future, as dealership showrooms will no longer have control over vehicle pricing. Showrooms will be set a directive from head office, which they will be required to follow.

Another consideration for Honda owners will be vehicle servicing and repairs. Since the number of dealerships and service centres is anticipated to be cut back significantly, motorists are likely to have fewer options to take their vehicle for service or repair. In fact, if the number of dealerships to close is as high as referenced above, it may turn out to be inconvenient or inaccessible for certain motorists to access these facilities.

Honda hasn’t shied away from the fact that it expects these changes to have a profound impact on its sales. The company is forecasting that its sales could fall to as little as 20,000 vehicles, which would be a drop of more than 50% on last year’s total (43,868). Whether this also flows through to demand in the second-hand market remains to be seen, however, it looks like both dealers and buyers are facing some tough times ahead.

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