- Honda is reducing dealership profits by cutting margins and setting a fixed marketing allowance, citing preparation for an electric future.
- Dealers are unhappy with the changes and will need to adjust to lower profits.
- Complimentary routine maintenance for 2025 model year vehicles will be halved from 2 years to 12 months.
After a similar move in Canada, it looks like Honda dealerships in the U.S. are getting their profit margins slashed too, as the carmaker looks to cut expenses in preparation for an electrified future.
According to a corporate memo obtained by Auto News, American Honda dealerships were recently told that the difference between the invoice price they pay for new vehicles and the MSRP will be reduced by 0.5%. In addition, Honda is making changes to marketing, advertising, and service payments. Dealerships are not happy.
Speaking with Auto News, the chairman of the Honda National Dealer Advisory Board, Brian Kanyan, said dealerships will have to adapt to the change. “It will have an impact on dealerships’ bottom line. How much will be determined as we move forward,” he said. “Dealers will have to adjust. Hopefully, Honda will look for ways to help us adjust.”
Read: What’s The Dumbest Response A Dealer Has Ever Sent You?
This news comes just a week after Honda dealers in Canada revealed the brand will cut their proft margins by as much as 44%. Now is not the best time to be a Honda dealership, then. The change will be implemented from May 1. Honda will also enforce a fixed dealer marketing allowance of $150 per vehicle from May 1.
“Obviously, Honda dealers are not happy about the change,” an unnamed dealer told the publication. “We don’t think the change is appropriate but it’s also not necessarily surprising.”
American Honda Motor Co senior vice president of sales, Mamadou Diallo, says the carmaker consulted with the National Dealer Advisory Board on the move. It will announce more details in April.
“Honda has a strong plan for the electrified future and has been making strategic investments that will enable us to continue to meet the needs of our customers and create a sustainable and mutually profitable future for Honda and our dealers,” added American Honda spokesperson Jessica Fini.
Cost cutting measures in servicing too
Beyond the possibility of dealers adding extra fees or finding other ways to make up for the reduced profits per car, owners will also feel the effect of Honda’s cost-cutting measures elsewhere. Starting with 2025 models, the Honda Service Pass program will be cut from two years of complimentary routine maintenance to 12 months / 12,000 miles (~19,000 km).
Until then, internal combustion engine and hybrid vehicles from the 2023 and 2024 model years will continue to benefit from a two-year or 24,000-mile service plan,, including oil changes, multipoint inspections, oil filters, and tire rotations.
“Whether we’re getting reimbursed from Honda or reimbursed from getting paid by the customer, I think it’s relatively neutral,” the dealer told the publication, adding that the Service Pass “had the benefit of driving more customer service with dealers”.
