Honda is reportedly slashing margins for its dealers in Canada by up to 44 percent in some cases. Framed as a necessary step in Honda’s transition to electric vehicles from internal combustion engines, the margin cuts apply across the lineup to varying degrees. Dealers appear to be both frustrated by the loss of income and prepared to pass the costs on to consumers.
The move was reported by Autonews Canada, which interviewed several Canadian dealers and other “industry sources with knowledge of the matter.” According to these sources, profit margins typically range from around 4.5 percent to about 8 percent, depending on the model. The proposed cut of at least 2 percent would decrease profit margins by approximately 44 percent on the lower end of the scale. In practical terms, a 2 percent reduction amounts to $700 less on a vehicle priced at $35,000.
“This is unprecedented,” the anonymous source told the publication. They added that while other brands have “nibbled around the edges” on margins regarding specific models or EVs, they’ve never implemented anything comparable “across the board”.
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Dealers are evidently displeased with this decision and conveyed to AutoNews that it was a “blatant money grab.” “It’s a bit cheeky to expect dealers to shoulder the cost of the manufacturers’ margin implications,” one dealer said. However, what could be viewed as even more audacious by Honda customers is how dealers intend to prevent any profit loss.
Will dealers offset the loss with extra fees?
AutoNews reports that some dealers expect Honda to now allow them to charge additional administrative fees to make up the difference. At this stage, Honda doesn’t allow that, a policy that might soon apply to some degree across all dealers in the USA. “These things are always shocking, but as long as they are working on an offset, that’s the important thing,” one dealer said.
Another dealer said that as a group, the dealer network could work together to force Honda to backtrack on this new policy. It’s plausible that the dealers could present a legal challenge based on Canadian franchise laws. That’s an avenue that many American dealers have utilized to fight regulations that could threaten profits.
In the USA, the federal government is working on rules that would reduce or eliminate junk fees like the ones often associated with dealers. It’s one specific case where legal action has halted the implementation of those rules. Honda has yet to confirm the margin profit shift.