Market Insight: Honda’s road ahead

BY TERRY MARTIN | 31st Mar 2020


HONDA remains committed to Australia and believes the company can remain viable in this marketplace as it cuts models and dealer numbers under a comprehensive restructure, and as a result expects sales to drop by more than half from mid-2021.

 

Its volume projections are now 1650 cars per month from that point, which is when it will switch to a business model where the dealers act as agents for the factory and work under a new regime that includes national pre-set prices.

 

These will apply to a reduced line-up – the Jazz light car and City light sedan are now moving into retirement – and a smaller number of variants within each model line, with a focus on more profitable, premium-positioned versions.

 

Honda says the impacts of the coronavirus on its Australian operations are not yet known, with its monthly volume expectations – which translate to 19,800 sales a year – based on the environment over the past couple of years that it has found increasingly difficult to trade through.

 

Among the difficulties Honda has identified are competition (more than 60 car brands competing for about one million new-vehicle sales each year), the depressed market (23 consecutive months of declining sales across the industry), vulnerability to exchange rate fluctuations (weak Australian dollar), and disruption in the industry (including increased regulation, lack of certainty on CO2 targets, advancements in technology and electrification).

 

Honda Australia says it remains committed to electrification, though only with new-generation models and only hybrids at this stage, and that its volume will be subject to a number of factors including business realities, product availability and market preferences.

 

All of that translates to fewer sales, as the company admits “we are shifting our focus from the quantity of sales to a quality customer experience, so chasing volume is no longer the priority”.

 

Just as Holden is exiting the table of top 10 brands with its decision to leave the market altogether by the end of this year, Honda’s move will likewise see it drop out of the same league.

 

This should allow Subaru to slot back in on a permanent basis and for others to make their presence felt, most notably Mercedes, but also other prestige and mainstream brands like BMW and Isuzu Ute.

 

Various others will have their eye on a coveted ‘top 10’ position, such as MG and, in time, Jeep.

 

To the end of February, Honda’s 6958 sales mark a 12 per cent downturn and follow a 15 per cent decline across the 2019 calendar year, when 43,868 vehicles were driven out of showrooms.

 

Its most recent decline came after a sustained period of growth for brand, which was gradually building back up from the 30,107 low point experienced in 2011 when its supplies were wracked by the devastating Japanese earthquake and tsunami early that year and then severe flooding in Thailand about six months later.

 

From a record-high pre-GFC annual mark of 52,571 units in 2008, Honda’s sales had been heading downward as a result of the financial crisis and the combined effect of the natural disasters saw it shed more than 20,000 units in the space of just three years.

 

Its recovery was bolstered by the arrival of new generations of its core models and all-new entrants in fast-growing segments.

 

The all-new HR-V small SUV immediately added more than 10,000 incremental sales to Honda’s bottom line in 2015, for example, while the redesigned Civic in 2017 saw the small car’s volume double that year to more than 14,500 units.

 

Similarly, the new-generation CR-V mid-size SUV that arrived in 2018 boosted the model’s sales by 70 per cent to more than 16,000 for the year.

 

These are the three core models that Honda Australia is now banking on to continue to provide the vast majority of its sales as it restructures its business, leaving the Odyssey people-mover and new Accord mid-sizer to play supporting roles.

 

Last year, the trio accounted for 82 per cent of Honda’s total volume – CR-V (13,810) was highest at 31 per cent, with HR-V (11,731) soaking up 27 per cent and Civic (10,531) at 24 per cent.

Read more

Honda culls dealers, models
VFACTS: Car industry takes big hit in 2019
Honda lays out Australian model plans
Driven: Honda keeps faith with Accord
Honda Jazz future hangs in balance in Australia
Honda details 2019 sales ambitions
Full Site
Back to Top

Main site

Researching

GoAutoMedia