Hot on the heels of Holden’s planned exit from the Australian market comes the sad news for many of Australia’s franchised new car Dealers that Honda will significantly cut its Dealer network.

The car maker is set to adapt an agency model, as it employs in New Zealand.

Reports have emerged that Honda Australia has organised meetings with its Dealers to explain its plan, which includes reducing Dealer numbers and running showrooms itself, concentrating the marketing, sale and supply of its vehicles to the public.

There are currently 105 Honda Dealers in Australia. It is believed Honda Australia is likely to reduce that number by about a third.

AADA CEO James Voortman spoke out strongly in criticism of the OEM.

“Our thoughts are with those affected Honda Dealers, their employees and their customers,” he said. “This is a kick in the guts for many of Australia’s 105 Dealer outlets currently selling and servicing Honda cars across Australia. 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.”

“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.”

Mr Voortman said the Honda move was the latest example of the vulnerable position in which franchised new car Dealers can find themselves, and it comes just 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.

“It underscores the urgent need for strong Automotive franchising laws in Australia. Laws that will set a minimum standard of conduct for offshore manufacturers operating in Australia.”

In a statement, Honda said the company remained committed to the Australian market.

“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,” the company said in mid-March.

An agency model, which Honda has operated in New Zealand since 2000 – and which Toyota also operates in New Zealand – would involve the manufacturer retaining ownership of demonstrator and showroom vehicles, paying Dealers a commission on each sale while reducing their overheads.

Commissions range from four percent to seven percent, depending on customer satisfaction, targets and other KPIs.

Honda also owns all parts, paying Dealers a sales fee.

Honda New Zealand provides Dealers with a management system free of charge, running all sales and service bookings through a centralised system. A Price Promise ensures customers get the same price no matter where they buy, with the price guaranteed not to change for the life of the model. Honda also provides all Dealers with access to the sales and service histories of all customers.

Customers have reported satisfaction with the lack of negotiation and haggling, and the Price Promise maintains good resell value. Honda New Zealand says it has an 80 percent customer retention rate.

While that all sounds good, the concern for Australian Honda Dealers is which ones get the chop, with reports that nine of the 12 Dealers in metropolitan Sydney might lose their franchises.

In February last year, Honda announced its intention to restructure its global manufacturing network as it increases its commitment to electric vehicles.

Over the past year the company has restructured its Dealer networks in several countries, including India and the United Kingdom.

The company has thus far remained tight-lipped about the mooted move to an agency model, maintaining that all will be revealed at the end of March.

Honda’s Australian sales dropped 15 percent last year. That was its worst result in three years, but was better than the eight years prior to that.