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How Honda plans to double its dealers’ profits

However, by the end of 2014, PCP penetration had risen to almost 90% from 30% at the end of the first quarter. For those customers insistent on still buying with cash, Honda is allowing dealers a small number of ‘cash tokens’, which give the dealer discounting ability.

The impact of that acceleration in the change cycle, as Honda buyers move from keeping the car for five years to changing every three, will become evident in the years ahead. The carmaker has introduced a new piece of software, Chrysalis, to support dealers in tracking the ‘parity’ point in the customer’s finance repayments and the car’s residual value, meaning the dealer can offer to change them into a new car early for the same monthly payment, before they get courted by a rival dealer.

In October, Honda added a three-year used car PCP product, offered nationally at 10.9% APR with three years’ free servicing, in preparation for when those PCP cars come back into dealerships at 30 months. This product is now promoted on every used car on Honda’s website.

The combined effect of PCP adoption and growth from new product segments will mean sales throughput 30-40% higher in 2017, Brannan said. Subject to supply constraints, Honda UK believes an annual sales volume of 80,000 units should be achievable within three years.

“The big concern I have, and the criticism we would get from the network, is whether we are changing too much too quickly. There is a risk that we’re changing too much. But looking at it the other way around, we had one year to get the business into a different shape, to effectively modernise the business, because in March at the Geneva Motor Show the whole product offensive starts, and we’ve got to be ready.”

 

Why dissatisfied Honda dealers should 'be careful what they wish for'

Honda was ranked bottom for franchise value in the most recent National Franchised Dealers Association Dealer Attitude Survey. It had been second from bottom for five years, but slipping into last place risked some painful headlines in the media.

Brannan said he has written to his dealers this month, warning them to be careful what they wish for.

“If you genuinely believe the Honda franchise is worse than Fiat or Chrysler, beware the consequences of putting that in the public domain, because dealers are the ones who’ll bear those consequences.”

He said Honda is one of the world’s most profitable companies and can sustain this, but dealers cannot. If they wanted to exit the franchise, they’re damaging the value of their brand and won’t get the price they deserve.

More importantly, they won’t attract the staff they deserve, and prospective buyers seeing this in the newspapers could be discouraged from buying Honda cars.



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Comments

  • ICEAGE - 29/01/2015 14:53

    So more jam tomorrow boys!!!..... If they wanted to resolve the dealer profit problem they could do it tomorrow, anything else is just a yarn

  • AW - 07/07/2015 18:33

    Interesting read. As a long term (25 years) customer of a Honda Dealer in Rochdale (Swansway) I can sense a real change in attitude. I first noticed this when on the day I picked up my new CRV (the latest car I bought from them) I was soundly reprimanded by the salesman as I had made the "mistake" of during the follow up call saying that he was excellent instead of good. Apparently this meant he didn't get his bonus.....that took the shine off delivery day for me. Now having had to pay for a new battery ...two and a half years into ownership and today ...fifth year of ownership that battery failed too, although apparently there is nothing wrong with the battery, the dealer contact was abrupt to say the least. Needless to say if this is a product of Honda UK's pressure on dealers then as a customer I won't be parting with any more money i.e adding to their profits. There are other car manufacturers! and dealers.