Honda Dealerships in the U.S. Face Profit Margin Cuts

Introduction

Honda is implementing changes in its dealership model in the U.S., reducing profit margins and adjusting marketing allowances to prepare for an electric future. This move has left dealerships unhappy and facing the challenge of adapting to lower profits.

Impact on Dealerships

A corporate memo obtained by Auto News revealed that Honda will reduce the difference between invoice price and MSRP by 0.5%. Additionally, adjustments to marketing, advertising, and service payments are being made, causing concern among dealers.

Dealer Response

Chairman of the Honda National Dealer Advisory Board, Brian Kanyan, acknowledged the impact on dealership profits and emphasized the need for dealers to adjust to the changes. He expressed hope that Honda would provide support during this transition.

Cost-Cutting Measures

Starting from May 1, Honda will enforce a fixed dealer marketing allowance of $150 per vehicle. This decision follows a similar move in Canada where profit margins were reduced by as much as 44%. American Honda plans to announce further details in April.

Service Changes

As part of cost-cutting measures, complimentary routine maintenance for 2025 model year vehicles will be reduced from two years to 12 months. This change will impact owners as well as dealerships, who may need to find alternative ways to maintain customer service levels.

Conclusion

Honda’s strategic shift towards electrification is driving these changes in dealership operations. While dealers express dissatisfaction with the adjustments, they understand the need to align with Honda’s future vision. The carmaker aims to create a sustainable and mutually profitable future for both Honda and its dealers.