HondaAustralia The controversial decision to switch to non-negotiable pricing in mid-2021 triggered a rapid decline in sales, but the carmaker says this approach is still working well.
In July 2021, Honda moved to a so-called agency model, where it owns inventory at dealers rather than selling vehicles to dealers. There are also nationwide fixed prices.
The brand subsequently recorded its two weakest sales years on record in Australia, falling from 29,040 vehicles sold in 2020 (the last full year before non-negotiation) to 14,215 sales in 2022 and 13,734 sales in 2023.
Honda reported an 18.9 percent increase in sales in the first quarter of 2024 compared to the same period last year, reporting 4,683 cars sold in Australia.
However, this is largely due to the launch of the ZR-V SUV, which has not yet gone on sale in the first quarter of 2023.
While the fixed-price model has been criticized for the resulting drastic drop in the brand’s sales volume, Honda Australia director Carolyn McMahon says the carmaker is still in a strong position and has no plans to return to negotiable pricing and franchises.
“[The] Agency [model] continues to work well for us. Our Honda centers are thrilled,” Ms McMahon said at the launch of the new Accord in Australia.
“Our Honda centers enjoy some of the benefits of an agency [model] Due to rising interest rates and floor plan costs, many players in the industry are currently having to deal with this.
“They are very happy with the fact that they don’t have to hold inventory and that is now Honda’s responsibility.
“In fact, one of the reasons we changed our business model was because if we didn’t, the survival of the franchise was in big question, and the profitability of our business partners is also critical.
“During the COVID years they had a sugar rush and the industry did very, very well. But we are seeing them diminish very quickly, and we believe the original design of our system will come into play more.”
As the rising cost of living affects the automotive industry, Honda sees itself as the protector of its dealers as it bears the fluctuating costs rather than the owners of a franchise.
“The financial cost pressure on retailers is currently enormous. Our Honda centers work very closely together and see this as a major advantage of the model:
“Our inventory management is under constant monitoring [about] how we can manage our inventory levels efficiently and effectively.
“Over the last few years, we have constantly learned as part of this new model and constantly adapted and optimized our internal process systems. So we have pretty solid inventory and cash management.”
Honda’s move to a fixed-price agency model was followed in 2022 by Mercedes-Benz, whose car sales fell from 28,348 in 2021 to 24,315 in 2023.