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Do Honda’s Changes Signal the Beginning of an Australian Exit?

After Holden made the much-anticipated and expected decision to withdraw from the Australian market, attention has turned towards the rest of the industry, as it faces a growing crisis. Compounded by the Coronavirus pandemic that is spreading across the world, local car dealers were already up against it, competing in a market that has been tracking at its worst levels since the GFC.

With pressure only likely to grow in the wake of the health and economic crisis that our country now faces, more questions are being asked about how sustainable it is for manufacturers to compete in such a small yet hotly-contested market such as ours.

This has sparked a lot of speculation around which companies might be next to exit Australia. Honda has enjoyed particularly strong sales in Australia over the years, but with the company facing profitability issues at a global level, the directive has been to improve its operational efficiencies. This has convinced some industry insiders that it was likely to be a matter of time before the Japanese brand would need to respond, and respond they have.

 

 

Dealership changes

Earlier this month, Honda was said to be considering three potential options for its future down under. First, the company was understood to have the option to close its national network and exit the market. Second, the Japanese auto-maker could pursue a ‘rationalisation’ strategy and reduce the number of showrooms across the country. Finally, the company could move towards an independent distributor model.

Commenting on the speculation at the time, the company said, “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”.

In recent days, the company has come to a decision. Starting from the middle of 2021, Honda will slash the number of dealerships across the country. From over 100 dealers at the moment, there are expected to be around 60 by the time the changes take place. Their owners are expected to reduce from 71 to just 12. In addition, the brand will also move to eliminate underperforming car models and adopt an “agency” style business with fixed prices across the board.

The move is set to spark a sharp cut in jobs across the Honda network, as well as a sizeable slump in sales for the brand as it focuses predominantly on the Civic small car, HR-V small SUV and CR-V medium SUV. On the back of the news, however, dealers have begun to interpret the move as the early stages of a formal Australian exit for the company. In the meantime, the official line from the manufacturer reads, “we are committed to the Australian market. This is about strengthening the business for the future”. But aren’t those familiar words we’ve heard before?

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