Japanese car giant Honda is on the brink of making a decision about its future in Australia, secret documents obtained by CarAdvice reveal.
Dealers have been told Honda is considering three options: to pull out of Australia and close its national network of 106 dealers, reduce the number of showrooms, or sell cars via an independent distributor. The decision will be made by the end of this month.
A statement from Honda Australia says: “Honda is committed to the Australian market and as a part of normal business, regularly assesses its operations and organisational performance. 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.”
A dealer bulletin issued this week said in part: “Some (meetings between dealers and Honda) are one-on-one, some are as a group. The Honda Dealer Council has not been made aware of the purpose of these meetings. However there has been speculation that the meeting may be related to the restructure of Honda’s retail supply chain.”
The word “restructure”, according to long-standing Honda dealers who have spoken to CarAdvice on condition of anonymity, refers to the three options listed above: leave Australia, cutback on the number of dealers, or move to an independent distributor.
Since this article was published earlier today, a number of dealer sources said they expect Honda will stay in Australia but the number of showrooms may be cut by one-third.
A move to a third party to distribute Honda cars in Australia could lead to price rises, dealers fear, because of the extra profit margin taken by an outside supplier to handle the importation of the cars, as well as parts and service support.
Honda announced to its dealers in a confidential briefing last May that it was under pressure from Japan to improve profitability or face “serious” consequences.
A leaked copy of a National Honda Dealer Council “minutes of the meeting” from last year says in part: “We understand the anxiousness amongst the network. We are in high level discussions about the mid (and) long term (plans for Australia).
“Our profit situation is on the global board agenda, which we are trying to fix. This means it is very serious,” the minutes from the Honda meeting said.
After meeting with overseas Honda executives, representatives for Honda Australia reported back to the dealer network: “We still have unanswered questions. The major issue is profitability and it is getting worse as the (Australian dollar) is deteriorating. We are working on options how to address this.”
Notes attributed to Honda Australia boss Stephen Collins said in part: “I won’t speculate on what the outcomes might be, but aim to update you and be open and transparent … when we have news.”
Later in the same meeting between Honda executives and Honda dealers, the group was told: "We have already informed dealers we will not push for any investments (in their showrooms) until we have clarity on the future. A key principle of ours is to keep investing in our people and the dealer network despite the uncertainty".
Honda dealers have been told they will be informed between March 23 and 26 about future plans for the brand. The media is due to be briefed on March 27.
Sales of Honda cars in Australia fell last year by 15 per cent in a market that was down by 7.8 per cent. Honda’s 2019 sales tally was its weakest performance in three years.
However, Honda's 2019 sales result of 43,800 vehicles was still higher than its tally each year from 2009 to 2016. In 2008, on the brink of the Global Financial Crisis, Honda sold as many cars as it did in 2018: about 51,000 new vehicles.