Thursday, March 26, 2020


Is it possible COVID19 will influence lifestyle and community change on a much wider basis than we are currently witnessing? I think the answer is yes, and one of Japan’s smallest and most vulnerable carmakers’ actions this week, heralds a new process for the distribution and sale of vehicles.

Honda announced this week that it will adopt an ‘agency model’ which will reduce the number of Honda franchise owners, and will see the range reduced to premium (higher margin) models with a new national pricing structure.

This 'agency' model is already operated in New Zealand by Honda, and Toyota. A report, out this week, forecast that currently Australia’s 105 Honda dealerships operated by 71 owners would be reduced to 60 dealerships operated by just 12 owners.

Honda’s announcement said: “This allows us to design a Honda network more appropriate to the size of our business.”

The onset of COVID19 is likely to be the catalyst for big changes in distribution processes.

We could go back to the old days, in Australia and outlying foreign markets, when manufacturers were represented by large dealers, rather than 'owning' their own distribution rights, and retaining all the profits from distributor margins.

It suggests to me that the viability of small volume operations may soon be so threatened by overwhelming costs, the 'agency' method which Honda is espousing could become adopted more widely. With Australia offering roughly 65 marques, in a less than one million units a year volume, there could be a number of departures.

In Australia this week, the car dealers' lobby group pressured the federal government to offer aid to dealers nationwide, much the same as that offered to airlines, to help them stay in business.

However, my contacts in the Australian capital, Canberra, tell me the government is initially not willing to offer such a big pricetag assistance package.

One politician told me: "I think buying a new car is a thoroughly discretionary decision, unless you current car has crapped itself (sic), and I'm not sure taxpayers would thank us for pouring money into car dealers' pockets."

If that attitude really does prevail, then if I were a salesman, a mechanic or a receptionist, then maybe it's time to consider a different job. With Australia's new car market shrinking in volume progressively over the last 23 months, without the onset of COVID19, this might just be the final nail.

John Crawford

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