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Where to now for Honda? Incoming agency business model should lead to better new cars and cooler technology for Australian buyers

Honda will stop chasing volume and instead focus on customer satisfaction and improved new models - like it did in the 1980s.

Is Honda planning to become the BMW of Japan once again?

Don’t bet against it, as the company is preparing to reset its business model in Australia come July 1, 2021, from a sales-driven mainstream player to a customer-focused premium brand offering vehicles of high-quality design and engineering.

That’s the goal anyway, as announced back in March, when Honda Australia declared its desire to stop chasing volume and concentrate squarely on buyer satisfaction instead.

What hasn’t been revealed yet, however, is the depth of change coming to core models that should restore the faith in the brand.   

To recap, Honda is moving to an “agency-style business model” where the Japanese-owned and -controlled company – rather than its 100-plus strong national dealer network – owns the stock it sells. Likened to how Apple operates globally, this will see fixed pricing rather than a negotiation model, which should lead to greater consistency, transparency and ease for buyers. There will also be a far greater emphasis on online ordering.

Honda concedes this haggle-free approach will likely cost sales, but it has long maintained that private rather than fleet buyers are the brand’s heartland, with a higher-than-industry-standard number of loyal consumers typically spending more on their vehicles anyway.

More importantly, while there are also concerns of price hikes and reduced choice – particularly after the cull of the affordable Jazz and City small-car lines (leaving Civic, HR-V and the fine CR-V as the mainstays, with bit players Odyssey and Accord as backup) – what lies ahead could also result in a real return to form.

Honda won’t comment on future plans, but there is a strong chance that the highly promising, next-generation HR-V might lead the change later next year. A complete rethink, it should turn the small-SUV market on its ear with chunkier styling and ground-up reengineering that includes hybrid and maybe even turbo options for the first time for local buyers.

That’s to be followed by the similarly redesigned, 11th-generation Civic in 2022, which will take a similar path to its 2022 HR-V sibling with much cleaner lines, substantially upgraded technology and – it’s rumoured – a far-more premium and striking interior presentation.

Then there’s the eventual return of Jazz. Sure, the current model won’t be replaced just yet, but Honda has repeatedly said “never say never”; it’s understood the door is being kept open in Australia for the all-new high-tech fourth-generation city car released in Japan earlier this year… if the conditions are right. Which they may soon be, given that the pressure to price it under $20,000 has evaporated now that the cheapest Toyota Yaris starts at over $22,000. Please revisit your decision on Jazz, Honda. With its friendly looks, hybrid availability and cool cabin, it personifies Honda’s quality accessible-tech approach.

Additionally, while today’s HR-V, Civic (Type R excepted), CR-V, Jazz and Accord all hail from Thailand to help keep prices competitive, the latter reason is no longer such a compelling consideration, as recent currency fluctuations make Japan a more reliable sourcing prospect.

Australia will miss out on the 2021 Jazz. Australia will miss out on the 2021 Jazz.

The upshot is a broader range of technologies and options on Japanese-built models on offer for Honda Australia to cherry pick. An example of this is the availability of manual transmission on Civic and HR-V – Thai-made models don’t offer it.

Obviously, there are many more new models coming in Honda’s product pipeline, most with some type of electrification, as the company reconnects with its progressive engineering heritage to help overcome increasingly stringent emissions regulations. After all, the Civic with CVCC combustion processes was the first volume production car that could meet tough anti-pollution laws back in 1974.

Such high levels of engineering prowess helped Honda prosper under the visionary management ethos of founder Soichiro Honda (1906-1991), nurturing a culture of technological advancement and innovation – especially in engine, suspension and body engineering – that filtered down from the seminal NSX supercar to the humblest Civic during the 1980s and ‘90s, setting the brand apart as “Japan’s BMW”.

Subsequently, Hondas came at a premium. A 1990 Civic GL at $21,800 cost $42,000 in 2020 dollars, compared to $34,000 for the $17,100 Toyota Corolla SE equivalent. For reference, today’s BMW 118i is $45,990 while a new Civic VTi is $22,590.

So, what changed at Honda?

Among other influences, harsher economic conditions and the desire to take on arch rival Toyota for sales dominance (especially in the lucrative US market after Soichiro-san retired) led to more affordable but arguably less innovative vehicles heading into the 2000s, driving Honda further mainstream. To be fair, most carmakers followed suit, as the real prices of vehicles plummeted yet safety and equipment levels rose. It was the only way to survive.

Which Honda did, and then thrived as the CR-V in particular struck a chord with buyers globally. In Australia, the company strove to hit a record 80,000 sales annually by 2010, which would have placed it behind Toyota, Holden and Ford but ahead of Mazda, Hyundai and Mitsubishi. Such heights were never reached, however, with the brand finding just shy of 44,000 buyers last year – and that was down 15 per cent over 2018’s tally. This year’s pandemic has slashed that by almost 40 per cent.

According to Honda Australia director, Stephen Collins, it became very clear in recent times that the old way of doing things no longer works.

The CRX was produced between 1983-1991. The CRX was produced between 1983-1991.

“We can’t sit still,” he said earlier this year, “the Australian market has seen 23 consecutive months of decline and every automotive business is rapidly changing.

“Customer preferences are changing and other industries have evolved while the automotive industry still uses a model that is decades old.”

Here's your chance to make a difference, Mr Collins. Back to the future, as they say.

Would you pay a premium for quality engineering, design and service? Honda is counting on it. 

The Power of Dreams may at last become a reality.