Honda Australia announces ‘devastating’ changes

Popular car maker Honda will shut dozens of dealerships across Australia, cut staff and reduce the number of cars offered as auto sales decline.

Honda will effectively cut dealers out of the car buying process in a move that could revolutionise the way Australians buy cars.

The brand will also shut some dealerships and cut staff to address a drop in new car demand.

The Japanese giant will adopt a similar structure to Tesla in which customers deal directly with the manufacturer instead of buying cars from dealerships which take their own cut of profits.

A single national sales price will eliminate haggling.

Honda will own its stock, with dealers essentially relegated to the vehicle demonstration, delivery, service and parts supply process under what it describes as “a simpler and more transparent experience to remove some of the pressures and anxiety sometimes associated with the sales process” which could provide “more clarity and price certainty during transactions”.

Customers will still be able to visit a dealer to test-drive and buy cars when the scheme comes into effect in July 2021, but they will face a reduced choice of dealerships and much smaller selection of models as the brand cuts costs.

Stephen Collins, director of Honda Australia, said the company “can’t sit still”.

“The Australian market has seen 23 consecutive months of decline and every automotive business is rapidly changing”.

Honda Australia Director Stephen Collins in happier times with F1 driver Jenson Button. Picture: Mark Stewart

The changes were mooted before the coronavirus struck Australia. Honda said it will be some time before the full impact of the virus is understood. It expects to sell about half as many cars under the new model.

Historically popular vehicles such as the Jazz hatchback may be cut from the range.

Australian Automotive Dealer Association chief executive James Voortman said Honda’s dealership closures were “devastating news”, and “especially disappointing” given the impact of the coronavirus on Australian businesses.

“We believe the overwhelming majority of Honda dealers will be terminated,” he said.

“It’s yet another example of a multinational manufacturer to withdraw and terminate dealers in Australia.

“If would be great if Honda Australia could tell us the number of dealers dumped today, but they can’t which is disappointing.”

Honda currently has more than 100 dealerships in Australia.

Industry sources suggest the number of dealerships will be halved, with its Sydney presence reduced from 12 to four outlets.

But the manufacturer said there are no plans to dramatically reduce the number of Honda outlets, which are.

Voortman called for affected staff to be “adequately compensated”.

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Honda expects to sell around had as many cars under the new deal, dropping to around 1600 per month.

Honda says a wide range of factors contributed to its decision, including fluctuating currency markets, fierce competition with more than 60 car brands, and a lack of certainty around future local regulations and emissions targets. Honda also bore the brunt of the Takata airbag crisis in Australia, recording the first fatality and the highest percentage of affected cars. 

While the company will remain in Australia, it will no longer chase sales volume through cutthroat incentives which threaten the sustainability of the car industry.

Prices will be standardised across the country, reducing buyers’ need to pitch sales staff against each other in order to get a deal.

Mercedes-Benz adopted a similar model for its EQC electric car in December 2019, a decision Voortman described as “a kick in the guts”.

Jason Nomikos, director of customer management for Mercedes-Benz in Australia, said the decision to cut dealers out of the loop was taken to eliminate price disparities between dealers, putting an end to haggling which was “not often a pleasant experience” for customers.

Tesla customers deal directly with the brand, which offers cars for non-negotiable prices through a sparse sales network.

Originally published as Honda Australia announces ‘devastating’ changes